Letter of Termination

What Is a Letter of Termination?

A letter of termination is a formal notice to inform an employee they will be dismissed from their current employment. A clear letter of termination can help the departing employee follow internal HR policies, protecting the organization and helping ensure a smooth transition. 

Is a Letter of Termination Required?

For the most part, the Federal Labor Standards Act (FLSA) doesn’t require organizations to provide letters of termination. The exceptions are when employees are part of a union, a collective bargaining agreement, or certain mass layoffs or corporate closures. Other employees are “at-will” employees, meaning that either the employee or the employer can choose to end employment. 

How Does the Type of Dismissal Change the Letter of Termination?

A termination letter needs to reflect the circumstances of the dismissal. Employers generally have three situations where they terminate employees:

• With cause: an employee’s performance or behavior isn’t meeting expectations or is in violation of the employer’s code of conduct.

• Without cause: the employer dismisses employees due to larger market factors, such as a lack of revenue leading to downsizing.

• End of contract: an employer that hires a short-term employee decides not to renew the employment contract beyond the initial term.

What Should a Letter of Termination Include?

A letter of termination should include the following:

• The termination date

• Reason(s) for termination

• An explanation of next steps for compensation and benefits

• A list of company property employees need to return

• Notification of agreements employees signed, such as non-disclosure agreements

• HR contact information for further questions

Why Should an Employer Write a Letter of Termination?

Termination letters serve two main purposes: they help employers keep records of termination decisions, and they provide employees the clarity they need to start the transition to the next stage of their career. Better relationships with departing employees also help the employer protect its reputation as potential candidates check employer review sites for ex-employees’ opinions. And in the event of a legal challenge, having a termination letter with all the details of the dismissal can help the employer document the reasoning for the dismissal and prove that they gave the ex-employee appropriate notification.