When dealing with an at-will employee, can you really fire someone for any reason? Can the company make deductions from the final paycheck? Does accrued, unused vacation get paid out?
When terminating the employment relationship, it is important to get the details right. Disgruntled ex-employees are more likely to file legal complaints than current employees, so ensuring careful compliance with employment separation laws will reduce legal risk at a critical point in the employment relationship.
Myth #1: Connecticut is an employment-at-will state, so we can fire anyone at any time for any reason.
Every state except Montana is an “employment-at-will” state, so Connecticut’s status as an “employment-at-will” state is nothing other than the default in the United States. Unless an employee has a right to continued employment established by contract (union contract or employment agreement specific to the employee) or a specific law (such as those providing job security for certain public officials), employees are “at will.” Note that an employment agreement could be formed unintentionally, possibly through informal verbal statements, which is why offer letters and employee handbooks should contain strong disclaimers.
If the employee is actually employed at will, either the employer or the employee may end the employment relationship for any reason or no reason, provided it is not for an unlawful reason. For example, an at-will employee cannot lawfully be fired because of their race, because they complained of sexual harassment, or because they engaged in protected speech. While the employer does not need to state the reason for separation in the case of an at-will employee, it is often a good idea to do so. Employers never terminate employment for no reason, so in the absence of a stated reason, the employee may speculate that the reason is an unlawful one and pursue legal action. A well-reasoned, well-documented basis for termination, especially if vetted through legal counsel before acting, can prevent legal action from being filed and, if a case is filed anyway, help establish a strong defense.
If the employee is not employed at will, contractual or statutory rights will apply to determine whether and how a termination may be carried out. In the case of public-sector employees not employed at-will, the employee has the right to a Loudermill hearing before termination.
Myth #2: When firing an employee, we can issue the final paycheck on the normal payroll cycle.
Connecticut law specifies that when an employer discharges the employee, the employer must pay the full wages by the next business day. If the employee voluntarily resigns, the employer can pay on the next regular pay day.
Myth #3: Employees are not entitled to commissions and non-discretionary bonuses for work performed before separation.
Commissions and non-discretionary bonuses that have been earned are considered wages and must be paid after separation, regardless of whether the employee was fired or resigned. Generally, the wage agreement between the employer and employee determines when commissions and non-discretionary bonuses are “earned.” If a commission is earned at the time a sale is made and payable when the customer pays, then the employer will owe the commission even after the employee has left. However, a well-drafted compensation arrangement can avoid such trailing obligations.
Myth #4: We need to pay out accrued, unused vacation or other paid time off (PTO)
This is an area subject to a wide variety of state laws, but Connecticut leaves this to the employer’s policy and practices. Specifically, if an employer policy or collective bargaining agreement provides for the payment of these items upon separation, that policy will be enforced and these items will be treated as wages. Employers have some choices in this regard, such as paying out PTO for resignations with notice but not for last-minute resignations, paying in all cases, paying in no cases, or paying for resignations but not terminations (or vice versa). The Connecticut Department of Labor may find an “unwritten policy” to establish a right to payment, so paid time off policies should address this matter directly, leaving no ambiguity.
Myth #5: We can make deductions from the final paycheck for unreturned equipment and the like.
Generally, employers cannot make such deductions because the right to withhold wages is extremely limited. Deductions from pay can be made in limited circumstances established by law (such as taxes) and when authorized by the employee on a form approved by the Commissioner of Labor. The Connecticut Department of Labor does not, as a practice, authorize deductions from unreturned equipment and the like, although an employer may sue an employee to recover the equipment or monetary damages.
Myth #6: I can fire someone verbally without any paperwork.
Yes, you can say, “You’re fired!” However, private-sector employers in Connecticut are required to immediately provide an employee with a copy of any documented notice of termination of employment. The termination notice must state that, should the employee disagree with any of the information contained in the notice, the employee may submit a written statement explaining their position. The employee statement must be maintained as part of the employee’s personnel file and accompany any transmittal or disclosure from the file made to a third party.
Additionally, any time an employee leaves employment, regardless of the reason for separation, employers must issue a separation notice with information on applying for unemployment benefits. Employers may also need to provide notice of rights under COBRA or retirement plans.
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Ending the employment relationship is difficult. The labor and employment attorneys at Berchem Moses PC can advise in these situations to ensure that you comply with all applicable laws when terminating employment.