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Termination of Employment Contracts in USA

1. Grounds for Termination

Generally, employees employed on an “at-will” basis may be terminated, with or without cause or grounds, provided it is not for an illegal reason, notably discrimination on grounds of a category protected by law or protected “whistleblowing” activity (reporting certain employer activity where the employee reasonably believes that the information he or she provided relates to potential violations of specific laws). The employment contracts of executives and other highly-skilled individual often incorporate a “just cause termination” clause, mandating that the employee may only be terminated for “cause” and lists the permissible grounds. In such cases, the grounds for a “just cause” termination are negotiated by the parties on a case-by-case basis.

2. Collective Dismissals

There are no restrictions on an employer’s ability to collectively dismiss its employees. However, the WARN Act requires covered employers to provide 60 days’ notice in advance of covered plant closings and mass layoffs to: 1) the affected workers or their representatives (e.g., a labor union); 2) the dislocated worker unit in the state where the layoff or plant closing will occur; and 3) to the local government.

In general, employers are covered by the WARN Act if they have 100 or more employees, excluding employees who have worked fewer than six months in the last 12 months and not counting employees who work an average of fewer than 20 hours a week.
A covered mass layoff is defined as a layoff that does not result from a plant closing, but which will result in an employment loss at the employment site during any 30-day period for 500 or more employees, or for 50-499 employees if they make up at least 33% of the employer‘s active workforce.
Even if a single mass layoff or plant closing does not trigger the WARN Act’s collective dismissal requirements, an employer also must give the 60-day WARN Act notice if the number of employment losses for two or more groups of workers, each of which is fewer than the minimum number needed to trigger notice, reaches the threshold level, during any 90-day period, of either a plant closing or mass layoff.

3. Individual Dismissals

Except as otherwise provided in an employment contract or collective bargaining agreement, no law requires employers to follow a formal procedure when discharging individual employees. However, employees are protected from unfair dismissal in violation of federal, state and local discrimination or anti-retaliation laws.

a. Is severance pay required?
Except as otherwise provided in an employment contract or collective bargaining agreement, employers need not make severance payments to terminated employees. However, employers often offer severance payments to bind an agreement made between the employer and employee at the time of termination to waive any potential claims arising out of the employment relationship.

4. Separation Agreements

Separation agreements are not required under U.S. law. In certain situations, the employee may agree to a contractual waiver of statutory rights, such as those under federal and state anti-bias laws. Such agreements must generally meet a number of requirements to be enforceable, including the following: (1) the waiver must be knowingly and voluntarily executed by the employee; (2) the process for obtaining the waiver must be free of employer fraud, undue influence, or other improper conduct; and (3) the agreement must be supported by consideration over and above any benefits to which the employee is entitled as a matter of policy or past practice (e.g., severance pay or a severance plan, extended or continued insurance coverage, outplacement services, pro rata incentive compensation, or forbearance on employee loans).

5. Remedies for employee seeking to challenge wrongful termination

Although individuals employed on an “at-will” basis can be dismissed with or without cause, they are protected from discriminatory adverse employment actions, including dismissal, under the federal, state and local civil rights laws, as well as various anti-retaliation provisions.

In addition to the civil rights statutes, employees are protected from dismissal in retaliation for engaging in various “protected activities,” including: 1) making reports or complaints regarding potential violations of federal securities law; 2) making reports or complaints of dangers to the public health or safety; and 3) reporting conduct that is against the public welfare or public policy. Some states have broader whistleblowing laws protecting complaints of possible fraudulent or criminal conduct.

Employees found to have been unfairly terminated in violation of the civil rights statutes or anti-retaliation provisions can resort to the various administrative agencies and the court systems.

For more information on these articles or any other issues involving labour and employment matters in United States, please contact John Sander, Partner at Jackson Lewis P.C. (www.jacksonlewis.com) at John.sander@jacksonLewis.com
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