Termination of employment

Grounds for termination

May an employer dismiss an employee for any reason or must there be ‘cause’? How is cause defined under the applicable statute or regulation?

Unless the employer contractually agrees otherwise (either in individual employment or a collectively bargained agreement), most employment in the United States is ‘at will’, meaning that it is not for any specific period, and the employer and employee each have the legal right to terminate the employment relationship at any time, with or without advance notice or procedures and with or without any particular cause or reason. However, employers cannot terminate at-will employees for a reason that is unlawful under federal, state or local law. The state of Montana does not recognise at-will employment after a 12-month, or otherwise agreed, probationary period. In that state, after the probationary period has elapsed, an employer may only terminate an employee for ‘good cause’, which is defined as ‘reasonable job-related grounds for dismissal based on a failure to satisfactorily perform job duties, disruption of operations, material or repeated violation of a written employer policy, or other legitimate business reason determined by employer’. The territory of Puerto Rico also does not recognise at-will employment.

Notice

Must notice of termination be given prior to dismissal? May an employer provide pay in lieu of notice?

Advance notice of dismissal or pay in lieu of such notice is not required by any federal, state or local law unless the termination of employment is owing to a mass layoff or plant closing as those terms are specifically defined under the Worker Adjustment and Retraining Notification Act (WARN Act) or any counterpart state law applicable to the employer. However, an employer may contractually agree to provide employees with advance notice of dismissal or pay in lieu of advance notice.

In which circumstances may an employer dismiss an employee without notice or payment in lieu of notice?

Unless the employer has contractually agreed to provide its employees with advance notice of dismissal or pay in lieu of advance notice (either in individual employment or a collectively bargained agreement), or the termination of employment is owing to a mass layoff or a plant closing under the WARN Act or any applicable state law counterpart, advance notice or pay in lieu of such notice is not required.

Severance pay

Is there any legislation establishing the right to severance pay upon termination of employment? How is severance pay calculated?

Except for Puerto Rico, no federal, state or local law establishes a right to severance pay upon termination of employment. Whether to provide severance pay and, if so, in what form or amount, are determinations made by the employer, or these may be required in individual employment or a collectively bargained agreement. In Puerto Rico, every employee who was hired without a fixed term, terminated without just cause, and completed their probationary period, is entitled to a certain amount of severance based on their seniority.

Procedure

Are there any procedural requirements for dismissing an employee?

No, unless the employer has contractually agreed to such procedures in individual employment or a collectively bargained agreement. Many states require, however, that terminated employees be provided information relating to their medical insurance benefits and eligibility for unemployment compensation insurance benefits.

Employee protections

In what circumstances are employees protected from dismissal?

An employee may be protected from dismissal if the employer has entered into individual employment or a collectively bargained agreement that requires that certain reasons exist or certain procedures be followed, including due process procedures, before terminating the employment relationship. Even if an employee is employed at will and typically is not protected from dismissal, various federal and state laws provide the employee with the right to file a claim for damages with a government agency or a federal or state court if the reason for the dismissal is unlawful. When such a claim is filed, the employee typically sues the former employer for the economic damages resulting from the unlawful termination (typically, past and future earnings and value of lost benefits). Depending on the type of claim, a former employee may also sue the former employer for additional monetary damages:

  • to compensate the former employee for emotional pain and suffering caused by the unlawful termination;
  • to recover the attorneys’ fees and costs of suit the employee incurred in prosecuting his or her claim;
  • to punish the employer for its conduct; or
  • to recover penalties that may be authorised by a specific statute under which a claim is brought.

 

Under certain claims, the former employee may request reinstatement of employment and implementation of remedial measures.

Mass terminations and collective dismissals

Are there special rules for mass terminations or collective dismissals?

Yes. The WARN Act generally requires an employer with 100 or more employees in the United States to provide its employees, and others, with 60 days’ advance notice if the employer will conduct a mass layoff or a plant closing, as those terms are specifically defined in the WARN Act. In addition to employees, others who are entitled to such advance notice are the employees’ union, the state government and certain local government officials. If the employer fails to provide the required notice, employees may file a lawsuit against the employer for the pay and value of certain benefits governed by the Employee Retirement Income Security Act that the employees would have received during the period, up to 60 days, for the number of days that advance notice should have been given. Also, the local government may recover a penalty of US$500 per day for up to 60 days for the number of days that advance notice should have been, but was not, given to the local government official.

Some states, such as California, Illinois and New York, also have their own laws that impose similar advance notice requirements as well as other requirements on employers in connection with layoffs and closures affecting a certain number of employees. These state laws typically cover smaller layoffs and closures than the WARN Act.

Class and collective actions

Are class or collective actions allowed or may employees only assert labour and employment claims on an individual basis?

Yes, individual employees may assert claims on behalf of other individuals through class or collective actions, and such claims have become extremely prevalent over the past decade. In a class action, all individuals who fall within the class definition will be deemed to be part of the class unless they affirmatively ‘opt out’ of the class. In a collective action, on the other hand, only those individuals who affirmatively ‘opt in’ will be deemed to be part of the class. In class or collective actions, employers may be required to disclose to opposing counsel the names and addresses of all employees, current and former, who may be part of the class so that opposing counsel may contact them.

Mandatory retirement age

Does the law in your jurisdiction allow employers to impose a mandatory retirement age? If so, at what age and under what limitations?

Generally, the imposition of a mandatory retirement age is not allowed, although there may be exceptions in certain specific industries.