What do I have to do when an employee leaves?
EmployeesComplianceEquity
When an employee leaves, the company pays their final wages on the timetable their state sets, stops their equity vesting and tells them how long they have to exercise, collects company property and cuts off access, sends the COBRA notice if it is large enough to be covered by the federal rule or its state's own, and decides whether it wants a release of claims, the usual reason for a separation agreement.
Final pay
Timing is state law and varies widely. California requires all wages, including accrued vacation, immediately on discharge, and within seventy-two hours when an employee quits without notice; a willful failure costs a day's pay for each day late, up to thirty days. New York allows until the regular pay day for the pay period in which the termination fell.
Equity
Vesting stops on the last day of service. Vested options stay exercisable for the post-termination period in the option agreement, and an incentive stock option loses ISO treatment if exercised more than three months after employment ends, whatever the agreement says. Unvested restricted stock becomes subject to the company's repurchase right, exercisable for a limited period.
Benefits and notices
An employer with twenty or more employees on more than half of its typical business days in the prior year is covered by COBRA, and a termination other than for gross misconduct is a qualifying event: the employer tells the plan administrator within thirty days and the administrator sends the election notice within fourteen. Employers of 100 or more face sixty days of WARN Act notice for plant closings and mass layoffs, and some states set lower thresholds. States including California and New York have their own continuation rules for smaller employers, and several require a written notice at separation.
The release
Severance buys a release of claims; that release is the separation agreement. For an employee aged forty or over, a waiver of federal age discrimination claims is valid only if they are advised in writing to consult a lawyer, given at least twenty-one days to consider it, forty-five in a group termination, and allowed seven days to revoke after signing.
Arabella does not carry a separation agreement today. Ask Arabella can walk through what one has to contain in your state.
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Written by the lawyers who built Arabella. This is legal information, not legal advice for your situation, and reading it does not make us your lawyers. For a real dispute or a high-stakes decision, talk to a licensed attorney. More questions.