Common Mistakes
What Small Employers Get Wrong at Termination
Mistake: Holding the final paycheck over equipment
You cannot withhold or delay a final paycheck because an employee hasn't returned a laptop or keys. This exposes you to wage claims and penalty pay even if the employee owes you property. Recover equipment separately — in small claims court if needed.
Mistake: Firing during or right after FMLA or medical leave
Timing a termination during or immediately after protected leave looks like retaliation, even if your reason is legitimate. If you have a performance issue that predates the leave, document that the decision was made (or would have been made) regardless of the leave.
Mistake: No documentation for a "surprise" termination
If an employee receives a positive performance review in March and is fired without warning in April, that inconsistency is a gift to a plaintiff's attorney. Keep a contemporaneous paper trail — dated warnings, emails, written feedback — even for at-will terminations.
Mistake: Saying the wrong thing in the meeting
Avoid: "We're restructuring" (when you're not), "This isn't about performance" (leaves the reason unclear), "We just need to go in a different direction" (vague and unhelpful). Be factual and brief. Giving a false or inconsistent reason in the meeting is evidence of pretext.
Best practice: Write a one-page termination memo for your file
Before the meeting, draft a one-page internal memo: the employee's name, title, termination date, the reason in 2-3 sentences, the documentation you relied on, and the final pay amount and timing. Keep it in the personnel file. If a charge is filed 6 months later, you'll have your contemporaneous record.
Frequently Asked Questions
Termination — Common Questions
Can I fire an employee without a reason?
In most U.S. states, yes — employment is "at-will," meaning either party can end the relationship at any time, for any lawful reason or no reason at all. However, you cannot fire someone for an illegal reason (discrimination, retaliation for a protected activity, or exercising a legal right). Montana is the only state with "just cause" termination protection for employees past a probationary period.
What exactly do I say when I fire someone?
Be direct: "I need to let you know that your employment is ending effective today. The reason is [one sentence]. Your final check will be ready [by/today]." Don't negotiate, repeat yourself, or get into an argument. Have a witness present. Avoid vague language like "we're going in a different direction" — if you're later sued, you need a consistent, factual reason on record.
When do I have to pay final wages?
It depends on your state. California: immediately at the moment of termination. Texas: within 6 calendar days. New York: next regular payday. Florida: next regular payday. Many states have different deadlines for fired vs. resigned employees. Use the
free Final Pay Calculator to get your state's exact rule and penalties for late payment.
Do I have to give a written reason for the termination?
No state requires you to provide a written reason to an at-will employee. However, several states (including California) require specific forms to be handed over at termination (e.g., Notice to Employee as to Change in Relationship). Keep your internal documentation — employees can request their personnel file after separation in many states.
Can I fire someone who is on FMLA or medical leave?
Generally no, not because of the leave itself — FMLA prohibits retaliation for taking protected leave. You can terminate for a documented, legitimate reason that predates and is unrelated to the leave. The timing creates significant legal risk; make sure the decision is well-documented before the employee went on leave.
What is the WARN Act and does it apply to small businesses?
The federal WARN Act requires 60 days' written notice before a plant closing or mass layoff if you have 100+ employees. Most small businesses are not covered. But many states have "mini-WARN" laws with lower thresholds — California covers employers with 75+ employees. Check your state if you're laying off 50 or more people.
Do I have to pay severance?
No federal or state law requires severance pay for at-will employees (except in some mass-layoff scenarios under state WARN laws). Severance is voluntary and typically offered in exchange for a signed release of claims. If you offer severance to employees over 40, ADEA requires a 21-day review period and 7-day revocation window — have a lawyer draft the agreement.
Can I require an employee to sign a release of claims in exchange for severance?
Yes, with proper process. Employees must receive something of value (the severance) in exchange, the agreement must clearly describe what rights they're waiving, and for employees 40+, ADEA requires specific disclosures, a 21-day consideration period, and a 7-day revocation window. Always have a lawyer draft or review separation agreements.