What you need to know when an employee leaves -- from final paychecks to severance pay to providing references.

What's Below:

Are there any rules about when I have to give workers their final paychecks?
I just had to fire an employee. What should I tell the rest of my workforce?
How do I give a reference for a worker I had to fire?
Am I legally required to pay severance to workers when they leave?
Are there situations when I should consider offering severance pay?
Is there anything I can do to protect myself from lawsuits by former employees?

Are there any rules about when I have to give workers their final paychecks?

Yes. Most states have laws requiring employers to give employees their final paychecks very soon after termination -- sometimes on their last day of work. This may mean that you cannot wait for your usual payroll process to issue the final check. In some states, these deadlines depend on whether the employee was fired or quit.

I just had to fire an employee. What should I tell the rest of my workforce?

This is a very tricky area. On the one hand, you want to acknowledge that their coworker is no longer around. On the other hand, you don't want to fuel office gossip or worse, wind up on the receiving end of a lawsuit. The safest course of action is to make a limited statement without going into detail. You might want to say something like, "Sarah is no longer with the company. Sam and Martin will be sharing her job duties until we are able to replace her."

Avoid the temptation to explain why the employee is gone. If these statements put the employee in a bad light (as most reasons for firing do), and the employee later hears of them, you might get sued for defamation.

How do I give a reference for a worker I had to fire?

The course of action least likely to land you in legal hot water is to say as little as possible. Many employers adopt a policy of giving out only dates of employment, job title, and final salary to prospective employers. As long as you stick to easily documented facts and keep it brief, you will stay out of trouble.

If you decide to give more expansive references, use caution. If you make false statements about a former employee with the intent to harm his or her reputation, you can be sued for defamation.

Am I legally required to pay severance to workers when they leave?

Probably not. Unless you lead your employees to believe that they are entitled to severance (through language in an employment contract, employee handbook, or oral promise, or by routinely paying severance to departing employees), you are under no obligation.

Are there situations when I should consider offering severance pay?

Yes. Many employers customarily offer severance pay to all long-term employees. A severance package helps ease the burden of being fired and may help the employee transition to a new job. A severance package may also help soothe the bad feelings of a fired employee. Not only will this ease your conscience when you have to fire employees, it will also make lawsuits from former employees less likely. After all, a former employee who has been rewarded for prior service to the company may not be particularly motivated to sue.

Is there anything I can do to protect myself from lawsuits by former employees?

Yes. You can ask the employee to sign a release -- an agreement not to sue you for being fired -- in exchange for certain benefits. Some employers routinely ask employees to sign a release as a condition of receiving a severance package.

If you decide to seek a release from a departing employee, you will probably need the help of a lawyer. In some states, a release must contain specific language or a court will not honor it. And you will want to tailor the release to meet the needs of your company and the particulars of the employment situation.