United States — Termination & Severance

The United States employment law framework differs fundamentally from the statutory protection regimes familiar to most non-U.S. employers. Under the at-will employment doctrine, which prevails in every U.S. state except Montana, an employer may terminate an employee at any time, for any reason not prohibited by law, and without advance notice. The employee likewise may resign without notice or stated cause. This common-law default applies in the absence of an express employment contract, collective bargaining agreement, or other limitation.

Scope and carve-outs

At-will status means that, absent a contract or union agreement, no statutory justification, performance-improvement procedure, or notice period is required to end the employment relationship. The employer need not establish "just cause," "social justification," or comparable grounds that would be mandatory in many other jurisdictions (e.g., German Kündigungsschutzgesetz § 1, French Code du travail Art. L1232, UK Employment Rights Act 1996 s.98).

However, termination may not be for a reason that violates federal or state law. Prohibited grounds include:

• Anti-discrimination statutes: Title VII of the Civil Rights Act of 1964 (race, color, religion, sex, national origin), the Age Discrimination in Employment Act (age 40+), the Americans with Disabilities Act, and parallel state laws.
• Retaliation: e.g., for filing a workers' compensation claim, reporting safety violations under OSHA, or participating in a wage-and-hour investigation.
• Public policy: many states recognize a common-law exception barring discharge that contravenes public policy (e.g., terminating an employee for jury service or whistleblowing).
• Implied contract or good faith: a minority of states (notably California) have judicially recognized exceptions when an employer handbook or course of dealing creates an implied promise of job security, or when termination is in bad faith.

Montana enacted the Wrongful Discharge from Employment Act (1987), which requires "good cause" for termination after a probationary period. All other 49 states and the District of Columbia adhere to the at-will default.

Federal WARN Act overlay

The Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2101 et seq., imposes a limited advance-notice obligation on larger employers. WARN applies to employers of 100 or more full-time employees (excluding part-time workers) and requires 60 calendar days' written notice before:

• a plant closing (shutdown of a single site affecting 50+ employees during any 30-day period), or
• a mass layoff (employment loss for 500+ employees, or 50–499 if they constitute at least 33% of the site's active workforce, during any 30-day period).

Notice must be given to affected employees (or their union representative), the state dislocated-worker unit, and the chief elected official of the local government. Exemptions include unforeseen business circumstances, natural disasters, and certain actively sought capital or business transactions. Violations trigger liability for back pay and benefits for each day of the violation, up to 60 days.

WARN does not impose substantive "just cause" requirements, severance obligations, or works-council consultation. It is purely a notice statute. For terminations below the WARN thresholds—individual dismissals, small-scale reductions—no federal advance-notice rule applies. State "mini-WARN" laws in jurisdictions such as California, New York, Illinois, and New Jersey may set lower thresholds or longer notice periods; employers must check state law separately.

Cross-border practical points

Non-U.S. employers often expect a redundancy consultation process, statutory notice linked to tenure, and mandatory severance formulas (as in the EU Posted Workers framework, UK statutory redundancy pay, or Brazilian CLT Art. 477 FGTS penalties). In the United States, these protections exist only if:

1. created by contract (individual employment agreement or collective bargaining),
2. promised in an employer handbook (which may give rise to an implied-contract claim in some states), or
3. required by a state statute (most states have no general severance mandate).

At-will employment permits termination on the employer's business schedule, with minimal procedural formality, so long as the reason is not discriminatory, retaliatory, or otherwise unlawful. Foreign-headquartered companies hiring U.S. workers should ensure that termination decisions are documented for a legitimate, non-discriminatory business reason and that any WARN or state-level notice obligations are satisfied.

Source: Termination guidance for employers, USAGov Source: 29 U.S.C. Ch. 23 – Worker Adjustment and Retraining Notification

The Federal Unemployment Tax Act (FUTA), codified at 26 U.S.C. Chapter 23, imposes a federal payroll tax exclusively on employers to fund the joint federal-state unemployment insurance system that provides cash benefits to workers who lose their jobs. Unlike Social Security and Medicare taxes, FUTA is paid entirely by the employer; it is never withheld from employee wages.

Statutory rate and wage base

FUTA imposes an excise tax equal to 6.0 percent of the first $7,000 in wages paid to each employee during the calendar year (26 U.S.C. § 3301). The $7,000 threshold is the FUTA wage base. Once an employee's cumulative wages for the year exceed $7,000, no additional FUTA tax accrues on that employee's wages for the remainder of the year, regardless of total annual compensation. An employee earning $150,000 and an employee earning $10,000 thus generate the same maximum FUTA tax base of $7,000.

At the statutory rate of 6.0%, the maximum annual FUTA tax per employee would be $420 ($7,000 × 0.06).

State unemployment tax credit: effective rate reduction to 0.6%

Employers who pay state unemployment insurance taxes (commonly called SUTA or SUI) on time and in full are entitled to a credit of up to 5.4 percent against the 6.0% federal rate (26 U.S.C. § 3302(a)). The credit is available regardless of the actual rate the employer pays under state law; even if a favorable state experience rating results in a lower state rate, the employer still receives the full 5.4% offset for FUTA purposes, provided the state taxes were paid on time.

This credit reduces the effective FUTA rate to 0.6% (6.0% − 5.4%), for a typical annual FUTA tax of $42 per employee ($7,000 × 0.006). The state unemployment tax credit may be claimed only for contributions paid by the due date of Form 940 (ordinarily January 31 of the following year, or February 10 if all FUTA tax was timely deposited). Contributions paid after that date receive only a partial credit capped at 90% of the amount that would have been allowed.

Credit-reduction states: higher effective rates when states carry federal UI loan balances

When a state borrows from the federal government to cover unemployment benefit obligations and fails to repay the loan within two years, the IRS designates that jurisdiction a credit reduction state. The FUTA credit available to employers in that state is reduced by 0.3 percentage points for each year the loan remains outstanding (26 U.S.C. § 3302(c)(2)), raising the employer's effective FUTA rate correspondingly. A state with a one-year credit reduction (0.3%) would raise the effective FUTA rate from 0.6% to 0.9% (maximum tax $63 per employee); a multi-year reduction can push the rate materially higher.

The Department of Labor announces credit-reduction states annually in November. For tax year 2025, California is subject to a 1.2% credit reduction (four consecutive years), resulting in an effective FUTA rate of 1.8% and a maximum per-employee tax of $126 ($7,000 × 0.018) for California employers. The U.S. Virgin Islands carries a 5.1% reduction. Credit-reduction adjustments are reported on Schedule A (Form 940).

Coverage tests: general, household, and agricultural

An employer is subject to FUTA and must file Form 940 (Employer's Annual Federal Unemployment Tax Return) if it meets any of three tests.

Under the general test, an employer must pay FUTA tax on wages to non-household and non-agricultural employees if:

• it paid wages of $1,500 or more to employees in any calendar quarter during the current or prior year, or
• it had one or more employees for at least some part of a day in 20 or more different weeks in the current or prior year (need not be the same employee or consecutive weeks).

The household employees test applies if the employer paid cash wages of $1,000 or more in any calendar quarter to household workers (nannies, housekeepers, yard workers, private nurses). Household employers ordinarily report FUTA on Schedule H (Form 1040) rather than Form 940, unless they have other non-household employees.

The agricultural employees (farmworkers) test applies if the employer paid wages of $20,000 or more to farmworkers in any calendar quarter, or employed 10 or more farmworkers for at least part of a day in 20 or more different weeks.

Employers that meet one of these tests are liable for FUTA even if they operate through an entity that has no other federal tax presence. Partners in a partnership and members of a single-member LLC treated as a disregarded entity are generally not treated as employees for FUTA purposes.

Filing and deposit obligations

Form 940 is filed annually and covers the calendar year. The due date is January 31 of the following year; if the employer deposited all FUTA tax when due, the deadline extends to February 10.

FUTA tax must be deposited quarterly (electronically via EFTPS) if the cumulative liability for a quarter exceeds $500. The deposit is due by the last day of the month following the end of the quarter (April 30, July 31, October 31, January 31). If the liability remains $500 or less, the employer carries it forward to the next quarter. If the total annual liability is $500 or less, the employer may pay the tax with the Form 940 filing instead of making quarterly deposits.

Termination context for cross-border employers

For non-U.S. employers hiring U.S. workers—whether through a U.S. entity or via an employer-of-record arrangement—FUTA is a recurring payroll cost that continues throughout the employment relationship and affects the economics of termination. State unemployment insurance benefits (funded in part by FUTA) are ordinarily available to discharged employees who lose their jobs through no fault of their own and meet state-specific wage and work requirements; the employer's state UI experience rating may rise following a discharge, increasing future SUTA premiums, but the federal FUTA rate and wage base remain constant. Unlike many non-U.S. jurisdictions that impose mandatory statutory severance formulas tied to tenure, the U.S. system front-loads the unemployment cost into ongoing payroll taxes rather than a lump-sum severance obligation at termination.

Source: 26 U.S.C. § 3301 – Rate of tax Source: 26 U.S.C. § 3302 – Credits against tax Source: IRS Topic No. 759, Form 940 – Employer's Annual Federal Unemployment (FUTA) Tax Return Source: U.S. Department of Labor – Unemployment Insurance Tax Topic Source: IRS Form 940 Instructions (2025)

The Fair Labor Standards Act (FLSA) imposes no deadline for delivery of a terminated employee's final paycheck. Federal law does not require an employer to pay final wages immediately upon discharge, nor does it mandate payment by the next regular payday or any other specific timeframe. The FLSA requires only that the employer pay at least the minimum wage and overtime compensation due for all hours worked; the statute "does not require...immediate payment of final wages to terminated employees." Employers subject exclusively to federal law may therefore pay final wages on the company's ordinary payroll schedule.

State-law overlay: immediate-payment and next-payday requirements

In contrast, the vast majority of U.S. states impose statutory deadlines for final-paycheck delivery that are materially shorter than employers' ordinary payroll cycles. The Department of Labor's Wage and Hour Division maintains a state-by-state chart of final-paycheck and regular-payday requirements; the summary identifies wide variation among the states but does not detail state penalty provisions or the precise statutory language governing what counts as "wages due."

State final-paycheck statutes documented in the DOL chart fall broadly into three timing models:

1. Immediate payment or very short window (same day to 72 hours): A number of jurisdictions require payment on the employee's last day of work or within 24–72 hours of discharge or resignation. The specific deadline often differs depending on whether the employee was discharged or quit, and whether the employee provided advance notice of resignation.

1. Next regular payday or next payday for the relevant pay period: Many states permit the employer to deliver the final paycheck on the company's next scheduled regular payday, or on the payday for the pay period in which the termination occurred.

1. No state statute; federal FLSA baseline applies: A small number of states have no final-paycheck timing law, leaving employers governed solely by the FLSA's general wage-payment obligation (which, as noted above, sets no specific deadline).

The DOL chart does not contain current penalty amounts or enforcement mechanisms; those details are governed by individual state labor codes and enforced by state labor departments or through private civil litigation in state courts.

State waiting-time penalties and private enforcement

Many states impose statutory penalties—often called waiting-time penalties—when an employer fails to meet the final-paycheck deadline. The structure and magnitude of these penalties vary by state and are not cataloged in the federal DOL materials. Common penalty frameworks observed in state practice include:

• Daily-accrual penalties: Some states require the employer to continue paying the employee at the daily-wage rate for each day of delay, up to a statutory cap (commonly 30, 60, or 90 days). The penalty accrues automatically if the failure to pay is deemed "willful" or intentional; courts in those jurisdictions have interpreted "willful" to include situations where the employer knew wages were due but failed to pay, even absent fraudulent intent.

• Fixed or multiple-of-wages penalties: Other states impose a lump-sum penalty (e.g., a specified dollar amount per violation) or a multiplier of the unpaid wages (e.g., double or triple damages).

• Administrative fines and private rights of action: Some state statutes authorize the state labor commissioner to assess administrative penalties and order restitution, while others permit employees to file private civil lawsuits to recover unpaid wages plus statutory penalties and attorney's fees.

Unable to confirm specific state penalty amounts, caps, or statutory citation details (including California Labor Code §§ 201–203, which are widely understood to impose immediate-payment and 30-day waiting-time-penalty rules) from primary state authority as of 2026-06-04.

Scope of "wages due"

Final-paycheck obligations extend to all compensation the employee has earned under state law and the terms of the employment relationship. State wage-payment statutes and case law define "wages" broadly to include:

• Unpaid regular and overtime hours worked through the termination date.
• Accrued-but-unused paid time off (PTO) or vacation: Roughly half of U.S. states treat accrued vacation or PTO as "earned wages" that must be paid out upon termination; the other half permit employers to implement use-it-or-lose-it or forfeiture policies, often subject to specific notice and plan-document requirements. The DOL state payday materials do not detail which states require PTO payout.
• Commissions and bonuses: Whether a commission or bonus is "earned wages" that must be included in the final paycheck depends on the governing plan or contract language and applicable state law. Disputes frequently arise over commissions on sales closed before termination but paid after termination, or bonuses with pro-rata or cliff-vesting provisions.
• Expense reimbursements: Most states require prompt reimbursement of employee business expenses; some include unreimbursed expenses in the definition of wages due at termination.

Employers may deduct from the final paycheck only those amounts expressly authorized by state law or the employee's written consent. Unauthorized deductions—such as unilateral offsets for unreturned company property, training costs, or alleged overpayments—may violate state wage-payment laws and trigger liability for waiting-time penalties on the amount withheld, even if the employer ultimately establishes a contractual right to reimbursement.

Unable to confirm detailed state-law deduction and PTO-payout rules from federal primary authority as of 2026-06-04.

Practical considerations for cross-border employers

Non-U.S. employers hiring U.S. workers—whether through a U.S. entity or an employer-of-record (EOR) arrangement—face final-paycheck compliance risk that differs sharply from the statutory termination regimes in most other common-law and civil-law jurisdictions:

1. Identify the controlling state law: The employee's principal work state ordinarily governs final-paycheck timing and penalties. Multi-state remote workers may create choice-of-law questions.

1. Calendar the final-paycheck deadline immediately: Many state deadlines are shorter than the employer's ordinary payroll cycle. Employers cannot wait for the next scheduled pay run if state law requires immediate or same-day payment.

1. Calculate "all wages due" comprehensively: Include all hours worked, any accrued PTO subject to mandatory payout under state law, commissions earned before termination, and unreimbursed expenses. Disputes over the "earned" status of variable compensation often turn on plan-document language.

1. Avoid unauthorized deductions: Document any setoff or deduction with reference to state law or a valid written authorization signed by the employee before the deduction occurs. Unilateral deductions for disputed amounts expose the employer to penalties on the withheld wages.

1. Document payment and delivery: Retain proof that the final paycheck was delivered (or made available) by the statutory deadline. Some states permit direct deposit only if the employee previously consented; others require physical check delivery or certified mail.

1. State administrative and private enforcement: Employees may file wage claims with the state labor department (triggering administrative investigation, assessment of penalties, and restitution orders) or bring private civil lawsuits in state court (which may include attorney's-fee-shifting provisions that make even small claims economically viable). Class-action risk is material in industries with standardized final-paycheck practices that violate state law, such as systematic failure to pay accrued vacation, blanket deductions for uniforms or equipment, or employer-wide delays in final payment.

Final-paycheck liability is separate from and in addition to any exposure under the federal Worker Adjustment and Retraining Notification (WARN) Act for large-scale layoffs, and separate from any negotiated severance obligations or contractual notice-pay provisions.

Source: Last Paycheck, U.S. Department of Labor Source: Handy Reference Guide to the Fair Labor Standards Act, U.S. Department of Labor Source: State Payday Requirements, U.S. Department of Labor Wage and Hour Division

The United States does not mandate statutory severance pay for terminated employees under federal law. Unlike statutory frameworks in other countries, there is no federal statute requiring a minimum severance amount, formula, or tenure-based entitlement. Severance pay is a matter of contract—negotiated individually, established by employer policy, or by collective bargaining agreement. The Employee Retirement Income Security Act (ERISA) may regulate ongoing severance plans, but it does not create a severance entitlement absent a qualifying plan or agreement.

Severance in exchange for a release of claims: key requirements

U.S. employers frequently offer severance in exchange for a release—a contract through which the separated employee waives the right to sue the employer for most claims related to employment or termination. Enforcement of any waiver or release hinges on compliance with statutory/regulatory requirements and general contract rules (voluntariness, adequate consideration, absence of duress/fraud).

Special rules for waiving federal age discrimination claims (ADEA and OWBPA)

Waivers under the Age Discrimination in Employment Act (ADEA), as amended by the Older Workers Benefit Protection Act (OWBPA, 29 U.S.C. § 626(f)), are valid only if strict statutory requirements are met:

• The waiver must be "knowing and voluntary," with a list of express requirements.
• The agreement must be in writing and refer specifically to ADEA rights or claims.
• The waiver covers only pre-existing claims before signing.
• The employee must be advised in writing to consult an attorney before signing.
• The employee must be given at least 21 days to consider (or 45 days for group terminations as defined in 29 U.S.C. § 626(f)(1)(F)(ii)), plus 7 days to revoke after signing.

Failure to meet any of these criteria renders the ADEA waiver unenforceable, though the balance of a severance/release agreement may survive. Requirements apply regardless of citizenship or severance amount.

Waivers of other federal or state claims

Waivers of claims under other federal statutes (Title VII, ADA, etc.) must also be knowing and voluntary but are not subject to OWBPA’s additional formalities. State law may also regulate or restrict waivers of certain rights. Certain claims, such as FLSA wage and hour claims, may not be validly waived in some contexts even with a severance agreement.

No federal minimum; severance is driven by contract and negotiation

In the absence of a binding policy, contract, or enforceable release, there is no federal mandate for severance. ERISA may apply if the severance program has ongoing administrative features, but does not create entitlement to severance on its own. State laws may impose additional requirements or provide greater employee protections; employers should always check for state and local rules in addition to the federal framework.

Source: EEOC, Understanding Waivers of Discrimination Claims in Employee Severance Agreements Source: 29 U.S.C. § 626(f) – Waiver of rights under ADEA/OWBPA requirements

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), found at 29 U.S.C. §§ 1161–1169, gives workers and their families the right to continue group health coverage at their own cost after certain employment events—including termination for any reason other than gross misconduct, or a reduction in hours that causes loss of coverage.

Which employers must comply?

• COBRA applies to private-sector employers with 20 or more employees on more than 50% of typical business days in the preceding calendar year who sponsor a group health plan (excluding church plans and federal government plans).
• State and local government health plans are not subject to COBRA, but to continuation requirements under the Public Health Service Act; federal programs like FEHBP are outside COBRA’s scope.

Who is eligible and when?

• “Qualified beneficiaries” are employees, spouses, and dependent children covered under the employer’s plan who lose coverage due to a “qualifying event.”
• Qualifying events include voluntary or involuntary job loss (other than gross misconduct), reduction in hours, divorce or legal separation, death of the covered employee, or a dependent child ceasing to qualify under plan terms (29 U.S.C. § 1163).

Notice and election process

• The plan administrator must notify qualified beneficiaries of their COBRA rights within 14 days of being told of a qualifying event. If the employer is the plan administrator, the notice period is 44 days from the event causing loss of coverage (29 U.S.C. § 1166).
• The election notice must include information on costs, coverage period, and how to elect coverage.

Coverage duration and cost

• Continuation coverage generally lasts up to 18 months for employment termination or reduction in hours, and up to 36 months for other qualifying events such as divorce, death, or loss of dependent status (29 U.S.C. § 1162).
• The employer can require the beneficiary to pay up to 102% of the total group premium (full cost plus 2% administrative fee).

When does coverage end?

• COBRA coverage may end early if premiums are not paid on time, the employer no longer offers any group health plan, the beneficiary becomes covered under another group plan, or qualifies for Medicare after electing COBRA (29 U.S.C. § 1162).

Employer compliance

• Employers failing to comply with COBRA notice or coverage obligations may face excise taxes under the Internal Revenue Code (26 U.S.C. § 4980B) and enforcement by the Department of Labor, but penalty amounts depend on circumstances and are not guaranteed per-violation.

Source: COBRA Continuation Coverage, U.S. Department of Labor Source: 29 U.S.C. § 1161 – COBRA continuation coverage

Federal law prohibits employers from terminating employees for reasons in violation of major anti-discrimination and anti-retaliation statutes. The central federal prohibitions arise under Title VII of the Civil Rights Act of 1964 (42 U.S.C. § 2000e-2), the Americans with Disabilities Act (ADA, 42 U.S.C. § 12112), the Age Discrimination in Employment Act (ADEA, 29 U.S.C. § 623), and the Family and Medical Leave Act (FMLA, 29 U.S.C. § 2615). Each statute applies to employers at or above a specific headcount threshold—Title VII and ADA: 15+ employees; ADEA: 20+ employees; FMLA: 50+ employees at a worksite—and bars discharges based on protected categories (race, color, religion, sex—including pregnancy, sexual orientation, gender identity, and national origin, disability, or age) or in retaliation for protected conduct (such as making a complaint or taking FMLA leave).

Prohibited grounds and anti-retaliation overlay

• Title VII makes it unlawful "to discharge any individual...because of such individual’s race, color, religion, sex, or national origin." It also bars retaliation for opposing unlawful discrimination or participating in investigations or proceedings (42 U.S.C. § 2000e-3). The definition of "sex" has included sexual orientation and gender identity since EEOC guidance and Bostock v. Clayton County, but enforcement posture recently changed: The EEOC rescinded its 2024 workplace harassment guidance as of January 22, 2026, which included expanded coverage for gender identity/pregnancy-related issues.
• The ADA bars discharge "on the basis of disability" and prohibits retaliation for exercising ADA rights (42 U.S.C. § 12203).
• The ADEA outlaws termination "because of [an] individual’s age" (40 or older) and bars retaliation (29 U.S.C. § 623(d)).
• The FMLA makes it illegal to "discharge or in any other manner discriminate against any individual for opposing any practice" made unlawful by the FMLA (29 U.S.C. § 2615(a)(2)).

Burden-shifting framework—McDonnell Douglas Where discriminatory motive is not directly proven, courts apply the burden-shifting analysis from McDonnell Douglas Corp. v. Green (411 U.S. 792 (1973)): (1) the employee must establish a prima facie case of discrimination; (2) the employer must then articulate a legitimate, non-discriminatory reason for termination; (3) the burden shifts back to the employee to show this reason is pretextual. As of June 2026, the Department of Justice’s Office of Legal Counsel has issued an opinion declaring the EEOC’s longstanding disparate-impact enforcement guidelines under Title VII unconstitutional, which could reshape agency enforcement but does not amend the statute itself. Employers should monitor ongoing agency and judicial developments on this point.

Remedies and statutory caps Remedies under Title VII and the ADA include reinstatement, back pay, attorneys' fees, and compensatory and punitive damages (subject to caps based on employer size: $50,000–$300,000; see 42 U.S.C. § 1981a). The ADEA provides for reinstatement, back pay, and attorneys' fees, but punitive damages are not available under the ADEA. The FMLA provides for reinstatement, back pay, and liquidated damages (29 U.S.C. § 2617). The EEOC enforces Title VII, ADA, and ADEA charges; FMLA retaliation or interference claims may proceed through the Department of Labor or directly in court.

Practical context for cross-border employers Non-U.S. employers or global businesses relying on at-will employment or EOR structures in the U.S. must ensure discharge decisions do not contravene these statutes. U.S. federal law provides a minimum protection framework even in the absence of a contract or tenure system, but coverage, enforcement priorities, and employer risk have changed as of early 2026 due to evolving agency guidance and DOJ interpretations.

Source: 42 U.S.C. § 2000e-2 (Title VII) Source: 42 U.S.C. § 12112 (ADA) Source: 29 U.S.C. § 623 (ADEA) Source: 29 U.S.C. § 2615 (FMLA) Source: 42 U.S.C. § 1981a (Title VII/ADA damages caps) Source: McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973) Source: EEOC Commission votes to rescind 2024 harassment guidance (2026) Source: DOJ OLC 2026 opinion: Title VII disparate-impact enforcement unconstitutional

Unemployment insurance (UI) in the United States is administered at the state level but operates within a federal framework requiring states to provide benefits to workers "unemployed through no fault of their own." The practical effect is that UI eligibility depends primarily on the separation reason—discharge, voluntary quit, or layoff—and the factual circumstances, as determined under state law.

Eligibility after discharge for cause, layoff, or redundancy Workers terminated for reasons other than "misconduct"—such as business-driven layoffs or redundancy—are generally eligible for UI in every state. Disqualification for "misconduct" is defined by state statutes but must meet a minimum federal standard: it must involve a willful or deliberate violation of a reasonable employer rule. Simple poor performance or negligence does not normally bar UI unless the state law so specifies (20 C.F.R. § 604.5). For example, theft, violence, or repeated insubordination is generally sufficient, but a single instance of error is not. The employer carries the burden of proving misconduct justifying disqualification.

Eligibility after voluntary quit A worker who resigns is usually disqualified from UI unless the quit was for "good cause attributable to the employer"—such as unsafe conditions, a substantial change in working terms, or certain family circumstances. States interpret "good cause" with some variation. For example, New York and California case law mirrors the federal minimum (20 C.F.R. § 604.3), but other states may have narrower or broader qualifying reasons. Quits for purely personal reasons (e.g., relocation, schooling) are almost always disqualifying under state law.

Waiting periods, benefit duration, and variation States may impose a one-week waiting period before benefits are payable and set the maximum duration (commonly 26 weeks, but state law governs). Benefit amounts similarly vary (see DOL UI Program Overview). Employers must report separation reasons accurately; false statements may trigger penalties under state UI law.

Employer contest rights Employers are notified of UI claims and can contest eligibility—submitting facts or documents to the state agency. Typically, if an employer alleges discharge for misconduct, the agency will schedule a fact-finding interview or accept written submissions; both parties may appeal an initial determination through administrative and, in some cases, judicial review. State law governs deadlines and procedures (see DOL UI Program Overview).

For representative state-specific eligibility definitions, see the DOL's comparative tables, but always consult the current statute or agency for the governing rule.

Source: 20 C.F.R. § 604.3—Eligibility after voluntary quit Source: 20 C.F.R. § 604.5—Eligibility after discharge for misconduct Source: About Unemployment Insurance, U.S. Department of Labor

A U.S. worker who claims unlawful termination on federal anti-discrimination grounds must first file a formal "charge of discrimination" with the Equal Employment Opportunity Commission (EEOC) or a parallel state agency before suing in court. This administrative charge process is a mandatory precondition for bringing claims under Title VII of the Civil Rights Act, Americans with Disabilities Act (ADA), and Age Discrimination in Employment Act (ADEA); it is also the pathway for retaliation and harassment claims under these laws (42 U.S.C. § 2000e-5(e), 29 U.S.C. § 626(d)).

Filing deadlines and dual filing

• The charge must be filed with the EEOC (or a state/local agency with "worksharing" authority) within 180 calendar days of the alleged adverse action—typically the date of termination. If the claim is also covered by state/local law (most states), the deadline is extended to 300 days. The clock starts on the last alleged discriminatory act, not when the former employee learns of their rights.
• Charges may be filed online, by mail, or in person. The EEOC transmits charges to the employer, who must respond—often through a written "position statement" and documents.

The employer’s obligations

• Upon notice, the employer has a short period (commonly 30 days, but the EEOC may specify another deadline) to submit its response. The employer should respond fully, supporting legitimate business reasons for the termination, and preserve all relevant documents.
• Retaliation against the charging party for filing the charge is strictly prohibited (42 U.S.C. § 2000e-3(a)).

Investigation and outcomes

• The EEOC investigates, usually via written submissions. It may request further documents or interview witnesses. The majority of cases are closed with a "no cause" finding.
• If the EEOC finds cause or cannot resolve the matter, it will issue a "right-to-sue" letter (for Title VII/ADA, this is after 180 days unless the agency decides sooner); for ADEA, the charging party may request a notice after 60 days (29 U.S.C. § 626(e)).

Filing suit and time limits

• Once the "right-to-sue" letter is issued, the former employee has only 90 days to file a federal lawsuit. Missing this deadline usually results in dismissal.

Special points: cross-border or EOR context

• Foreign-headquartered or EOR employers with U.S. employees must still cooperate fully and may be subject to EEOC investigation and litigation in the U.S. courts. Improper handling of the response can escalate risk and liability.

For official guide and forms: Source: EEOC, Filing a Charge of Discrimination For statutory deadlines: Source: 42 U.S.C. § 2000e-5(e) – Time for filing charges Source: 29 U.S.C. § 626(d) – Filing requirements under ADEA

The FTC’s nationwide non‑compete ban, finalized as 16 C.F.R. Part 910 on April 23, 2024, is no longer in effect and is no longer part of federal law as of February 2026.

Summary of prior rule and initial effective date The 2024 rule would have made nearly all private-sector non‑compete agreements with workers (employees and contractors) unenforceable as of September 4, 2024, except for certain pre‑existing senior executive arrangements. Employers would have been required to provide notice that non‑competes could not be legally enforced. The rule’s formal text, supporting commentary, and compliance guidance were published in the Federal Register and on ftc.gov (original rule text).

Legal challenge and vacatur Before the rule took effect, it was challenged in federal district court (Ryan, LLC v. FTC, N.D. Tex. 2024). On August 20, 2024, the court vacated the rule, barring enforcement nationwide. The FTC initially noticed an appeal but dropped it in September 2025, abandoning further litigation (FTC press release).

Formal removal from CFR On February 12, 2026, the FTC formally published a Federal Register notice removing 16 C.F.R. Part 910 from the Code of Federal Regulations (Federal Register Notice). The FTC’s non‑compete ban is now null, and there is no operative federal rule barring non‑compete agreements as of Q2 2026.

Current enforcement status

• There is no comprehensive federal regulation or blanket ban on non‑competes in the U.S.
• The FTC may still challenge particularly egregious non‑competes or anticompetitive conduct under case‑by‑case Section 5 enforcement, but not under any categorical rule.
• State law governs non‑compete enforceability, and broad bans remain in force in jurisdictions like California and Oklahoma, but not by federal mandate.

Employers must now track state, not federal, law for non‑compete compliance as of June 2026. Prior federal compliance guidance is obsolete; consult the current FTC website for updates.

Source: FTC Final Rule: Non‑Compete Clauses, 16 C.F.R. Part 910 (original rule, now vacated) Source: FTC press release: Rule vacation and end of appeal, 2025 Source: Federal Register: Removal of the Non‑Compete Clause Rule (2026)

For-cause termination—also called dismissal "for cause," "with cause," or "just cause"—is a familiar statutory concept in many foreign jurisdictions. In the United States, however, there is no general statutory or common-law requirement for "cause" to lawfully end the employment relationship. Except for employers in Montana and select contractual or collectively bargained arrangements, the default rule governing most U.S. private-sector employment is at-will: an employer may terminate for any reason, or no reason, provided the reason is not prohibited by law (discrimination, retaliation, public policy—see the separate section on at-will employment).

When does "for cause" matter in the U.S.?

• Where an employment contract (individual or union) specifies that the employee may be terminated only “for cause,” "gross misconduct," or “just cause,” the employer must establish a legitimate reason and typically follow any process outlined in that contract. Contracts may enumerate what is considered cause (e.g., fraud, theft, insubordination), but there is no universal statutory definition outside one notable exception.
• Under the federal Worker Adjustment and Retraining Notification Act (WARN), "for cause" has no impact on notice obligations; both at-will and cause-based terminations can trigger WARN if the scale and circumstances match statutory thresholds (see at-will/WARN section).
• State unemployment insurance (UI) is the primary statutory context where "for cause" or "gross misconduct" is defined: Employees discharged for misconduct (as defined under state statute) are typically disqualified from UI benefits. The federal regulations set a minimum floor (20 C.F.R. § 604.5): "misconduct" must involve a willful or deliberate violation of a reasonable employer rule; most states require proof of intentional wrongdoing—not merely unsatisfactory performance.

Montana exception: Montana’s Wrongful Discharge from Employment Act (Mont. Code Ann. § 39-2-904) requires “good cause” for post-probation termination. Elsewhere, no U.S. state requires a justified reason to terminate absent contractual terms.

Summary: In the U.S., "for cause" matters only if (1) required by contract (private/corporate, or collective agreement), (2) relevant to UI eligibility, or (3) outside Montana, the at-will rule controls. Employers should avoid using disciplinary labels suggesting cause unless prepared to prove misconduct under the contract or state UI standards.

Source: 20 C.F.R. § 604.5 – Unemployment Insurance: Discharge for Misconduct Source: Mont. Code Ann. § 39-2-904 – Wrongful Discharge from Employment Act Source: U.S. DOL, Unemployment Insurance Program Overview

Several U.S. states supplement the federal Worker Adjustment and Retraining Notification (WARN) Act with their own “mini‑WARN” statutes—enacting separate employee-notice obligations for mass layoffs, plant closures, and relocations. These state laws can impose stricter requirements than federal WARN, including longer notice periods, lower employee thresholds, and broader definitions of a triggering event. Cross-border and multinational employers often overlook these mini‑WARN rules when planning workforce reductions in the U.S.; compliance failures can result in liability and delay.

California Cal‑WARN Act (Labor Code § 1400 et seq.) California's mini‑WARN applies to any industrial or commercial facility with 75 or more employees within the preceding 12 months. The law requires employers to provide 60 days' written notice before:

• a mass layoff (defined as a loss of employment for 50 or more employees at a single establishment during any 30-day period),
• relocation of an operation to a location at least 100 miles away, or
• termination (closure) of an establishment.

Unlike federal WARN, California's law applies to both full‑ and part‑time employees in its calculations, and it lacks certain federal exemptions (e.g., "unforeseen business circumstance"). Notice must be given to affected employees, the Employment Development Department, local workforce investment boards, and the chief elected official of each city and county government within which the terminations occur. There is no minimum employer-size carve‑out beyond the 75‑employee count under the prior 12 months.

New Jersey Millville‑Dallas‑Airmotive Plant Job Loss Notification Act (N.J.S.A. 34:21‑1 et seq.) New Jersey's mini‑WARN, as amended, applies to employers with 100 or more employees (including part‑time) and covers facilities that have operated for more than three years. The act requires 60 days’ notice in advance of a mass layoff—defined as (i) a termination or layoff of 50 or more employees (full‑ or part‑time) or one‑third of the workforce (whichever is less) in a 30‑day period, or (ii) the transfer or closure of a covered establishment. Notably, New Jersey imposes mandatory severance—one week’s pay per year of service for every affected employee—with an additional four weeks due if the employer fails to provide the full notice period.

Practical implications

• State mini‑WARN statutes often apply at lower headcount thresholds than federal WARN (California: 75; New Jersey: 100).
• They include part‑time workers in the count (unlike federal WARN).
• They apply to more types of facility transfers or short‑term layoffs.
• They may impose mandatory severance penalties for lack of notice (as in New Jersey).

Employers planning any redundancy, layoff, or restructuring in the U.S. must check for state or local notice statutes in addition to federal WARN. Penalties for non‑compliance may include back pay, benefits, civil penalties, and statutory severance.

Source: California Labor Code § 1400 et seq.—Cal‑WARN Source: N.J. Stat. Ann. 34:21‑1 et seq.—NJ mini‑WARN

The enforceability of non-disparagement and confidentiality clauses in U.S. severance and separation agreements was fundamentally restricted by the National Labor Relations Board (NLRB) in its February 2023 decision, McLaren Macomb, 372 NLRB No. 58. The Board held that offering employees severance agreements containing broad confidentiality and non-disparagement provisions constitutes an unfair labor practice under Section 8(a)(1) of the National Labor Relations Act (NLRA), as such provisions may unlawfully interfere with employees’ rights under Section 7 to engage in protected concerted activity.

Background: Section 7 and employer restraints Section 7 of the NLRA guarantees employees—other than supervisors and certain excluded workers—the right to discuss wages, working conditions, and terms of employment and to engage in concerted activity for their mutual aid or protection. Section 8(a)(1) makes it unlawful for employers to "interfere with, restrain, or coerce" employees in the exercise of these rights (29 U.S.C. §§ 157–158).

The McLaren Macomb decision The NLRB in McLaren Macomb held that the mere proffering of a severance agreement with broad confidentiality or non-disparagement language is an unfair labor practice if the language would "tend to chill" employees’ Section 7 rights, regardless of whether the employer actually tries to enforce the provision. Specifically, the Board found that contractual terms prohibiting employees from making statements that could disparage the employer or require employees to maintain confidentiality regarding the terms of the agreement or any information about the employer are unlawful if they are not narrowly tailored to legitimate business needs (e.g., trade secrets or proprietary information). Blanket restrictions—such as prohibiting any criticism or discussing the agreement itself—are unlawful as to non-supervisory workers, regardless of whether they receive severance consideration.

Practical limits and carve-outs

• The rule applies to non-supervisory employees covered by the NLRA (most private sector workers other than supervisors, managers, independent contractors, and certain others). Agreements with supervisors are not covered by these restrictions.
• Confidentiality clauses limited to trade secrets or proprietary data may be lawful, but restrictions on discussing terms, policies, or the existence of the agreement broadly will trigger NLRB violations.
• The NLRB's General Counsel Guidance (GC 23-05, March 2023) further confirms that overly broad non-solicitation, confidentiality, and non-disparagement provisions in severance agreements are unlawful in most cases, and any attempt to "chill" Section 7 rights—even without actual enforcement—places employers at risk.

Federal context—other enforcement These NLRA limits are separate from the FTC's 2024 ban on non-competes (see separate section) and from requirements for ADEA/OWBPA-compliant releases. State laws may further restrict or regulate these clauses, but cannot authorize what is prohibited by the NLRA.

Summary: As of June 2026, U.S. employers (including multinationals and EOR providers with U.S. employees) must not include blanket non-disparagement or confidentiality language in separation agreements with ordinary employees; only clauses narrowly targeted at true trade-secret or proprietary business information are likely to withstand NLRB scrutiny.

Source: McLaren Macomb, 372 NLRB No. 58 (2023) Source: NLRB General Counsel Memo GC 23-05 (2023) Source: 29 U.S.C. §§ 157–158 (NLRA Section 7, Section 8)

A severance pay arrangement in the United States can trigger federal ERISA plan status if it constitutes an "employee welfare benefit plan" under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1002(1). The distinction is critical: once a severance program crosses this threshold, it is subject to specific compliance duties—annual reporting (Form 5500), summary plan descriptions, and fiduciary obligations, and it may preempt state law remedies. Failure to recognize ERISA status can expose employers to penalties and litigation risk, particularly for global businesses scaling U.S. operations or offering standard severance across terminations.

ERISA statutory test for severance plans ERISA defines “employee welfare benefit plan” to include “any plan...established or maintained by an employer...for the purpose of providing...benefits in the event of...unemployment.” Severance benefits, if administered according to a plan, are included. However, a one-time, ad hoc payment to a single employee typically falls outside ERISA; only ongoing administrative schemes or written policies with ongoing obligations are covered (29 U.S.C. § 1002(1)).

Key authority: Fort Halifax Packing v. Coyne (1987) The Supreme Court held that a one-time severance payment required by statute (or similar arrangements) does not create an ERISA plan unless it requires “an ongoing administrative program.” (482 U.S. 1, 17 (1987); see also DOL Reg. 29 C.F.R. § 2510.3-2(b)). In other words, an ERISA plan exists if (1) the arrangement requires the employer or administrator to make discretionary decisions or to manage a program of ongoing payments, eligibility, or claims, and (2) the benefits are not just a single, mechanical one-off payment.

Regulatory carve-outs and safe harbors DOL regulations exclude certain “payroll practices”—e.g., continued salary for a short period after termination and certain window programs—from ERISA’s definition. Severance paid as part of a one-time, uniformly-applied reduction in force, with no ongoing administrative scheme, is generally excluded (29 C.F.R. § 2510.3-2(b)). But a written policy, or the practice of routinely offering similar terms to multiple employees, increases the risk of ERISA status.

Practical compliance triggers

• Written or consistently applied severance plans usually trigger ERISA, requiring:
• A written plan document
• Summary Plan Description (SPD) disclosure to covered employees
• Annual Form 5500 filing (for plans with 100+ participants)
• Formal claims and appeals process
• Fiduciary accountability over plan administration
• Non-ERISA plans may remain subject to state wage, contract, and mini-WARN statutes.
• ERISA preempts most state severance and contract claims for ERISA plans—though not wage payment or late-check statutes.

Failure to comply risks DOL investigation, civil penalties, or participant lawsuits.

Source: 29 U.S.C. § 1002(1) – ERISA plan definitions Source: 29 C.F.R. § 2510.3-2(b) – Severance pay safe harbor Source: Fort Halifax Packing v. Coyne, 482 U.S. 1 (1987)

Constructive discharge occurs when an employee’s resignation is treated as a termination because the employer intentionally created intolerable working conditions that would compel a reasonable person to quit. This doctrine is recognized in federal employment law under statutes such as Title VII of the Civil Rights Act, the Age Discrimination in Employment Act (ADEA), and the Americans with Disabilities Act (ADA). Constructive discharge claims expose employers to the same liability risks as formal terminations—including discrimination or retaliation claims, back pay, and reinstatement.

Federal standard: Supreme Court articulation The leading Supreme Court authority is Pennsylvania State Police v. Suders, 542 U.S. 129 (2004). The Court held that “[t]o establish ‘constructive discharge,’ a plaintiff must show that the abusive working environment became so intolerable that her resignation qualified as a fitting response.” The intolerability must be objectively severe; the standard is whether “a reasonable person in the employee’s position would have felt compelled to resign.” The employee must also prove the conditions were created with the intention of forcing her resignation or were the foreseeable result of the employer’s actions (Suders, 542 U.S. at 141).

Relation to discrimination and retaliation claims Constructive discharge enables a plaintiff who resigned to bring claims as if they had been terminated. In practice, constructive discharge is invoked most frequently in federal anti-discrimination and retaliation cases—for example, where harassment based on a protected category (race, sex, age, disability) or reprisal for protected activity makes continued employment untenable. Courts look for evidence of “aggravated circumstances” above ordinary workplace disputes: a consistent pattern of harassment, demotion, pay cuts, reassignment to menial work, or threats that make employment impossible.

Procedural and practical points

• The employee must usually establish the constructive discharge before proceeding to the underlying discrimination or retaliation claim.
• The statute of limitations for filing begins to run on the resignation date.
• Employers can sometimes defend against constructive discharge by showing the employee unreasonably failed to use available complaint or grievance procedures.

For global employers, constructive discharge doctrine means that simply accepting a resignation does not always end exposure. If the resignation is triggered by unlawful workplace conditions, the employer bears the same risk as if it had initiated the discharge.

Source: Pennsylvania State Police v. Suders, 542 U.S. 129 (2004)

The Family and Medical Leave Act (FMLA), 29 U.S.C. §§ 2601 et seq., provides eligible employees of covered employers with up to 12 weeks of unpaid, job-protected leave per 12-month period for specified family and medical reasons, such as the employee’s own serious health condition, the birth or adoption of a child, or the need to care for a family member. Critically, the FMLA creates a statutory shield against adverse employment actions, including termination or discrimination, taken because an employee exercised or attempted to exercise FMLA rights.

Job restoration and protection against discharge

Section 2614(a) of the FMLA requires that employees taking FMLA leave be restored, upon return, to the same position held before leave, or to "an equivalent position with equivalent employment benefits, pay, and other terms and conditions of employment." Termination, demotion, or non-restoration because of FMLA leave generally violates the Act. The Department of Labor’s regulations (29 C.F.R. § 825.214) reinforce this reinstatement mandate.

Prohibition against interference and retaliation

Section 2615(a) makes it unlawful for any employer to interfere with, restrain, or deny the exercise of FMLA rights, or to discharge or discriminate against an employee for using or requesting FMLA leave. Courts broadly construe this as barring "retaliation" for protected leave.

Key exceptions to job-protected status

• The FMLA does not entitle the employee to job restoration if the employment would have ended regardless of the leave (e.g., layoff of the entire department, or the position is eliminated in a bona fide reorganization not related to the leave). Employers may terminate employment for legitimate reasons unrelated to the FMLA leave, but must carefully document and be able to prove that the decision was independent of any FMLA use (29 C.F.R. § 825.216(a)).
• Key employees, defined as salaried employees among the highest paid 10% at a worksite, may be denied restoration if restoration would cause "substantial and grievous economic injury" to the employer’s operations (29 U.S.C. § 2614(b); 29 C.F.R. § 825.218).

Remedies and enforcement

Employees terminated (or not restored) in violation of FMLA protections may seek reinstatement, back pay, benefits, and liquidated damages (29 U.S.C. § 2617). Liability attaches regardless of the employer’s intent if the statute is violated.

Global-mobility context: Non-U.S. employers with U.S. workers—including EOR arrangements—must recognize that U.S. law provides strong job protection during FMLA leave, including in at-will employment settings, and that classic "redundancy" logic from other jurisdictions does not waive FMLA safeguards.

Source: 29 U.S.C. § 2614 – FMLA job restoration rights Source: 29 C.F.R. §§ 825.214, 825.216 – Restoration, exceptions Source: DOL Fact Sheet #28A: Employee Protections under the Family and Medical Leave Act