• Pamela Tahim Thakur & Robert Hensley

Employer Considerations When Terminating an Employee

Terminating an employee can be a taxing process. Use our guideline to help you maintain a professional attitude while handling your business informatively. Below are federal and state requirements:

Federal Requirements

  • COBRA Benefits. For employers with 20

or more employees, a Consolidated Omnibus Budget Reconciliation Act (COBRA) notice and election form needs to be provided to employees who are participating in the employer’s group health plan the day before the termination and to any of the terminating employee’s dependents on the plan. See https://www.dol.gov/ebsa/cobra.html for more information.

  • HIPAA. Provide a Health Insurance Portability and Accountability Act (HIPAA) certificate of group health plan coverage to all terminated employees who are participating in the group health plan at the time of termination.

  • WARN Act Covered Positions. If termination is due to a layoff or position elimination covered under the WARN Act, notices need to be sent out 60 days prior to termination. Find more information at https://www.doleta.gov/layoff/warn.cfm.

  • The IRS requires notices to terminating employees within certain time frames to advise them of their rights to retirement benefits.

California Requirements

  • Disclose Unemployment Benefits. The California Employment Development Department (EDD) requires employers to provide their unemployment benefits pamphlet, For Your Benefit, DE 2320, to all discharged or laid off employees no later than the effective date of the discharge or layoff. Find the pamphlet here.

  • Notice to Employee as to Change in Relationship. California Unemployment Insurance Code 1089 requires employers to give a written Notice to Employee as to Change in Relationship form to all discharged or laid off employees immediately upon termination. No written notice is required if it is a voluntary quit, promotion or demotion, change in work assignment or location (some changes in location require a WARN notice), or if work stopped due to a trade dispute. Find a sample notice here.

  • HIPP Notice. The Department of Health Care Services requires employers with 20 or more employees to provide the Health Insurance Premium Payment (HIPP) notice, DHCS 9061, to certain employees covered under the program. See details on HIPP and required notice on Form DHCS 9061 on the California Department of Health Care Services.

  • Cal-COBRA Continuation Rights. Employers must notify any covered, terminated employees of their Cal-COBRA continuation rights. Cal-COBRA must be offered to both terminated employees of small employers (2-19 employees) and terminated employees covered under federal COBRA when their 18 months of federal COBRA coverage expires.

  • Provide Notice of Continuation, Disability Extension and Conversion Coverage Options. California Labor Code Section 2808(b) requires employers to provide to employees, upon termination, notification of all continuation, disability extension and conversion coverage options under any employer-sponsored coverage for which the employee may remain eligible after employment terminates.

  • Worker Adjustment and Retraining Notification Act. The Worker Adjustment and Retraining Notification Act requires certain employers to give affected employees at least 60 days written advance notice of any plant closing or mass layoff. See more information at http://www.edd.ca.gov/Jobs_and_Training/Layoff_Services_WARN.htm.

  • Final Paycheck. Don’t forget to have the employee’s entire paycheck ready to go at the moment that you terminate. This should include unused vacation, which is considered wages in California. (If the employee quits, you have 72 hours to give her a final paycheck.) It’s not an excuse if the employee storms out – deliver it to her at a home address if need be, or deposit it into a bank account. Failure to pay the employee her final paycheck at the time of termination will result in hefty fines many times the amount owed.

All of these steps and forms can be extremely confusing. If you feel as though you do not have a firm understanding of the complexities of California and Federal requirements, the Thakur Law Firm can guide you through the process, please email us at info@thakurlawfirm.com.

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