Termination Laws by State (2025 Guide)

Common Legal Traps That Can Turn Into Wrongful Termination Claims

Just because you have the right to terminate doesn’t mean you’re automatically protected from legal claims. Many terminations lead to lawsuits because employers overlook certain legal protections. Here are some of the most common mistakes that trigger wrongful termination claims:

• Discrimination: Firing someone because of race, gender, pregnancy, religion, age (40+), disability, national origin, sexual orientation, or genetic information is illegal under federal and state law.
• Retaliation: Terminating an employee for reporting harassment, wage violations, safety concerns, discrimination, or for using protected leave can lead to serious legal consequences.
• Public policy violations: You can’t fire someone for reasons that violate public policy—for example, reporting illegal activity, filing a workers’ comp claim, serving on a jury, or refusing to break the law.
• Contract violations or misclassification: Firing someone who has contractual job protections—or who’s been improperly classified as exempt or an independent contractor—can lead to breach of contract or wage claims. Learn more about proper employee classification here.
• Constructive discharge: Forcing someone to quit by creating an intolerable work environment can be treated like a wrongful termination, especially if it’s tied to harassment, discrimination, or retaliation.

These types of claims often result in back pay, reinstatement, legal fees, and sometimes even punitive damages. The best way to avoid problems is to fully understand the legal risks ahead of time—and document your decisions carefully.

Final Paychecks and Severance Rules

Once an employee’s job ends, you’re legally required to pay out any final wages they’ve earned—including unpaid hours, overtime, commissions, or unused PTO if your state requires it. When that final paycheck is due depends heavily on state law.

Some states require immediate payment if you terminate someone. Others give you until the next regular payday or a set number of days after separation. You’ll find those state-by-state deadlines listed in the table above.

When Severance Pay Is Required (and When It’s Not)

In most cases, severance pay is not required by law. Many companies offer it voluntarily as part of a separation agreement, either to help the employee transition or to limit potential legal claims.

However, a few states do have severance requirements in specific situations:

• New Jersey: Requires mandatory severance for certain mass layoffs covered under its state WARN Act (one week of pay for every year of service).
• Maine: Requires severance for certain plant closings involving 100 or more employees (one week of pay for each year of service).

If you offer severance, make sure your agreements comply with any federal rules—especially the Older Workers Benefit Protection Act (OWBPA), which applies if the employee is over 40.

Termination Notice Requirements

In most cases, you aren’t legally required to give advance notice when letting an individual employee go—unless you’ve made promises in a contract, policy, or employee handbook that say otherwise.

But larger layoffs and plant closures are a different story. That’s where both federal and state WARN laws kick in with strict notice requirements.

Federal WARN Act

Under the federal WARN Act, companies with 100 or more full-time employees generally must give 60 days’ written notice if they:

• Shut down a plant or facility where 50 or more workers will lose their jobs, or
• Lay off 500 or more employees, or 50–499 workers if that’s at least 33% of the worksite’s total workforce.

Failing to comply can result in back pay for affected employees, plus civil penalties.

State WARN Laws

Many states have their own mini-WARN laws that go beyond federal requirements. Some apply to smaller companies, cover smaller layoffs, or require more notice than 60 days. In some cases, severance payments may also be required. You’ll find the full state-by-state WARN rules in the table above.

Best Practices for Legal Terminations

Even if a termination is fully legal, the way you handle it matters. A well-managed termination process reduces legal risks, protects your business, and shows professionalism. Here are some steps every employer should follow:

Keep Thorough Documentation

Document any performance problems, policy violations, or misconduct that led up to the termination. Written warnings, performance reviews, and improvement plans can all help support your decision if it's ever challenged.

Apply Policies Fairly

Enforce your policies consistently for all employees. If similar situations are handled differently, it may open the door to discrimination or retaliation claims.

Check for Legal Protections

Before finalizing the decision, check whether the employee recently engaged in protected activity—like filing a complaint, taking leave, or reporting a violation—or falls into a legally protected category. If so, make sure your documentation clearly shows a legitimate business reason for the termination.

Review Contracts and Agreements

Look at any employment contracts, severance agreements, or union rules that might affect the process. Follow any required notice periods, payment terms, or dispute procedures.

Plan the Termination Meeting

Prepare what you'll say ahead of time. Keep the conversation short, professional, and focused on the decision. Avoid unnecessary details or emotional discussions. Always follow up with a written termination letter.

Follow Final Paycheck Laws

Make sure you issue the final paycheck on time according to your state’s rules. Include any owed PTO, commissions, or bonuses. Provide any required documents like COBRA notices or unemployment information.

Protect Company Property and Information

Collect company property such as laptops, keys, and ID badges. Immediately revoke system access to protect company data and prevent security risks.

Handle the Process Professionally

Always conduct terminations in private, treat the employee with respect, and avoid public embarrassment. A professional approach helps prevent unnecessary conflict and protects your company’s reputation.

Termination Documentation Checklist

Good documentation is one of the best ways to protect your business when ending someone’s employment. Use this checklist to make sure you’ve covered everything and minimized your legal risks:

• Records of any performance issues, policy violations, or misconduct that led to termination.
• Copies of written warnings, performance improvement plans, and prior disciplinary actions.
• Supervisor notes, meeting summaries, or coaching records related to the employee’s performance.
• Confirmation of any protected activities the employee participated in (such as complaints, leave requests, or whistleblower reports).
• Copies of employment contracts, severance agreements, or collective bargaining agreements that apply.
• Review to ensure similar situations were handled consistently for other employees.
• A completed termination letter explaining the decision in writing.
• Proof that final wages were paid on time and any accrued PTO, commissions, or bonuses were included.
• Confirmation that all company property was collected and system access was revoked.
• Copies of any required exit documents, such as COBRA forms or unemployment information.

Solid documentation shows that your decision was fair, well-supported, and compliant with the law—making it much harder for legal claims to succeed.

Conclusion

Terminations are one of the most sensitive—and legally complex—parts of running a business. Even in at-will states, there are clear federal and state rules you need to follow when ending someone’s employment. The more you stay informed, document your decisions, and apply your policies fairly, the more you reduce your legal risks and protect both your company and your employees.

For more help staying compliant with labor laws, explore our full library of employer guides:

• Overtime Laws Guide
• Meal and Rest Break Laws
• Employee Rights 2025 Guide

And if you’re looking for easy-to-use time tracking software that helps you stay compliant with wage laws, TimeClick can help.