Ask our experts: Getting voluntary terminations right

A: Yes.

No law requires employees to provide notice of voluntary termination; doing so is merely a custom or courtesy. That’s because most states are generally considered to be at-will employment states, which means that either the employer or employee may terminate the employment relationship at any time and for any reason, unless a written employment contract or collective bargaining agreement says otherwise.

While notice periods allow employers to organize the details of the termination, having the employee hang around until their notice period is up can create problems. The employee may slack off at work or drag down the morale of employees who are staying. As a result, many employers pay employees for the full notice period and have them leave early.

But paying an employee for their full notice period isn’t the end of the story. There are two other scenarios that must be considered: whether you offer the employee the option to leave early, and they voluntarily accept this option; or whether you require the employee to terminate earlier than the full period provided in their resignation notice.

Let’s look at both scenarios:

• If you offer the employee the option to leave early and they voluntarily accept, then the separation from employment is considered voluntary. State final pay laws will determine whether you are required to pay the employee for the full notice period.
• If you require the employee to leave earlier than the end of their full notice period, then, also depending on state law, you may be converting a voluntary resignation into an involuntary termination. In that case, the employee will be eligible for unemployment benefits, which will be charged to your company’s account and may raise its unemployment insurance tax rate for the next year.

A: It depends.

For the timing of final pay, many state wage payment laws distinguish between voluntary and involuntary terminations and allow employers to pay final wages to an employee who terminates voluntarily on the next regular payday. Localities may have different rules.

But there are exceptions. In California, for example, an employee who gives 72 hours’ prior notice of their intention to resign must be paid when they leave. But if they do not give 72 hours’ prior notice, the employer may send the final payment by mail if the employee requests it and provides a mailing address.

However, if an employer converts an otherwise voluntary termination into an involuntary termination, the final pay laws of many states require immediate payment.

As we said, terminations are complicated. The Fair Labor Standards Act (FLSA) requires nonexempt employees to be paid for all hours worked. On the other hand, exempt employees must be paid a guaranteed weekly salary in any week they do any work, but you can prorate their salary for the first and last weeks in which they worked.

The FLSA also requires employers to keep detailed records of nonexempt employees’ working time, including the:

• Time and day of the week when their workweek begins
• Hours worked each day
• Total hours worked in each workweek
• Total wages paid each pay period
• Date of payment and the pay period covered

For purposes of final pay and your payroll records, an employee’s last day should be recorded as the last day they performed work for you.

A: Again, it depends.

State wage payment laws define wages for final pay purposes. Most laws allow employers to write their own policies regarding whether accrued vacation or other PTO balances will be paid as part of final wages. The payment of accrued time, for example, could be contingent on employees’ giving notice.

The following states have exceptions requiring employers to pay out accrued time regardless of whether the termination is voluntary or involuntary:

• California
• Colorado
• Maine
• Nebraska
• North Dakota
• Rhode Island