Employee Offboarding Checklist: What to Do When Someone Leaves
When an employee leaves, employers need answers to questions that can carry immediate financial and legal consequences. When is the final paycheck due? Should the company offer severance? What unemployment paperwork must be provided, and who is responsible for sending the COBRA notice?
An effective employee offboarding checklist should address these obligations before the employee’s last day whenever possible. The requirements depend on where the employee works and the circumstances of the separation. For businesses in Connecticut and New York, understanding the differences is particularly important.
1. Confirm When Final Wages Must Be Paid
Final wages are compensation the employee has already earned. They are separate from any severance the company may offer, and payment should not depend on the employee signing a separation agreement.
The deadline can depend on how employment ends.
Connecticut Final Pay Rules
Connecticut law distinguishes between a discharge and other types of separation:
- Discharge: Earned wages must be paid no later than the next business day after the discharge.
- Resignation: Earned wages must be paid by the next regular payday.
- Layoff: The statute provides for payment by the next regular payday.
Because Connecticut treats a discharge differently from a layoff, employers should confirm the appropriate classification before scheduling final payroll.
New York Final Pay Rules
In New York, final wages are generally due by the regular payday for the pay period worked. If the employee requests that the payment be mailed, the employer must do so.
Before processing payment, reconcile hours worked and applicable overtime. Review earned commissions or bonuses under the governing agreement to determine what is owed and when. Outstanding business expenses should also be addressed separately.
2. Determine Whether Unused Vacation Must Be Paid
An employee’s unused leave balance does not automatically establish what the employer owes. The type of leave, applicable law, and the company’s written policy all matter.
In Connecticut, unused vacation must be paid out at separation when the employer’s policy or a collective bargaining agreement provides for it. The payout rate may not be less than the employee’s earned average rate for the accrual period. If the policy does not address payout, employers should plan to pay accrued vacation. The CT DOL may treat it as earned wages, and unpaid wages can result in double damages and attorney’s fees. Employers can avoid payout only with a written policy that clearly says unused vacation is forfeited at separation, or that sets conditions for payout, such as a required notice period.
In New York, accrued vacation must generally be paid unless a written policy, communicated to employees in advance, states the conditions under which it is forfeited. Accrued New York paid sick leave does not need to be paid out.
If the employer uses a combined PTO bank, review the policy carefully rather than assuming every leave category is treated the same way. Do not introduce a new forfeiture condition at separation and apply it retroactively.
3. Decide Whether to Offer Severance
Severance is compensation or benefits provided in connection with an employee’s departure, beyond amounts already owed. The federal Fair Labor Standards Act does not require severance pay. An obligation may nevertheless arise under an employment agreement or an established severance plan. Applicable state requirements must also be considered.
When Might Severance Be Appropriate?
An employer may consider severance when eliminating a position or reorganizing the business. It may also be appropriate when supporting a long serving employee through an involuntary departure or negotiating a separation agreement.
Before making an offer, review existing commitments and how comparable departures have been handled. Consistent decision making helps employers explain why severance was offered and how the amount was determined.
How Does Severance Work?
A package may provide a lump sum or payments over a defined period. Some employers also contribute toward continued health coverage. There is no universal formula that requires a particular number of weeks of pay for each year of service.
The written terms should explain the payment amount and schedule. Any conditions attached to payment should be explicit, along with the duration of any benefits contribution.
If severance is offered in exchange for a release of claims, the employee must receive something of value beyond what they are already entitled to receive. Earned wages cannot serve as that additional consideration. Employment counsel should prepare or review the agreement.
Allow Time to Review a Separation Agreement
Certain agreements require specific review periods. For employees age 40 or older, a valid waiver of federal age discrimination claims generally requires at least 21 days to consider an individual agreement and seven days to revoke after signing. Certain group termination programs require at least 45 days for consideration and additional disclosures.
These timing rules are only part of the requirements for an enforceable waiver. Employers should build the applicable review period into the separation timeline rather than request an immediate signature.
4. Provide Unemployment and Separation Paperwork
Unemployment paperwork is a separate obligation from a severance agreement. Employers should provide required notices even when they believe the individual will not qualify for benefits. The state agency determines eligibility.
Connecticut Separation Packet
Connecticut employers must provide the state’s separation packet to the employee at separation, regardless of the reason for leaving. If it cannot be provided at that time, the instructions require mailing it to the employee’s last known address.
The packet includes the unemployment notice identified as Form UC-21A. Complete the employer information accurately and report the reason for separation. The form also asks about payments the employee will receive after their last day of work.
New York Record of Employment and Termination Notice
New York employers must provide the Record of Employment, Form IA 12.3, to separated employees to assist with an unemployment application. This is distinct from the written termination notice.
New York also requires written notice of the termination date and the date employee benefits will end. The notice must be provided no more than five working days after termination.
Can Severance Affect Unemployment Benefits?
Severance can affect unemployment eligibility or the timing of benefits. The result depends on state rules and the payment arrangement.
For example, New York explains that severance received within 30 days of the last day of employment may affect unemployment benefits. Paying it as a lump sum does not automatically prevent that effect. Employers should report payments accurately and avoid promising an employee a particular benefits outcome.
5. Confirm Health Coverage and COBRA Responsibilities
It is important to first check the date active health coverage ends under the plan. Coverage may end on the separation date or continue through another date specified by the plan. Give the employee accurate information rather than assuming coverage continues through the end of the month.
Federal COBRA generally applies to group health plans sponsored by employers with at least 20 employees in the prior year. Qualified beneficiaries may be charged up to 102% of the total coverage cost, including the portion previously paid by the employer. Smaller employers should check applicable state continuation requirements with their insurer or benefits adviser.
Does COBRA Apply After a Resignation?
A resignation can qualify, as can an involuntary termination, when the event causes a loss of coverage. Termination for gross misconduct is an exception, but employers should obtain advice before relying on that exception. Continuation coverage following job loss generally lasts up to 18 months, subject to applicable conditions.
Who Sends the COBRA Notice?
Responsibilities are divided between the employer and plan administrator:
- Employer notification: Generally, the employer has 30 days to notify the plan administrator of the qualifying event.
- Election notice: The administrator generally has 14 days after receiving notice to provide the COBRA election notice.
When the employer is also the plan administrator, a combined 44 day deadline generally applies. Depending on the plan’s terms, the deadline may run from the qualifying event or the resulting loss of coverage. Confirm the applicable dates with the administrator and document that the notice was issued.
How Long Does the Employee Have to Elect Coverage?
Qualified beneficiaries generally have at least 60 days to elect COBRA, measured from the later of the coverage loss date or the date the election notice is provided. The initial premium payment generally cannot be required earlier than 45 days after the election.
A severance offer that includes a temporary COBRA subsidy should state when the employer’s contribution ends. It should also explain what the employee must pay to maintain coverage afterward.
6. Keep Property Recovery Separate From Final Pay
Arrange for the return of company equipment and remove access to business systems at the appropriate time. Preserve necessary records before closing accounts.
An unreturned laptop does not automatically authorize an employer to deduct its value from final wages. Connecticut restricts wage withholding and deductions. New York also prohibits deductions for business losses outside permitted categories. Review the applicable rules before making any deduction, and do not delay required wages while waiting for property to be returned.
Employee Offboarding Checklist for Employers
Use this checklist to confirm that the financial and benefits requirements have been addressed:
- Identify the applicable final wage deadline.
- Calculate earned compensation and review unused leave obligations.
- Determine whether severance is required or appropriate.
- Obtain legal review of any release agreement and confirm review periods.
- Provide required unemployment forms and separation notices.
- Confirm the date active health coverage ends.
- Notify the benefits administrator and verify COBRA notice delivery.
- Document any employer contribution toward continued coverage.
- Arrange property return without improperly withholding wages.
- Retain payment records and copies of required notices.
Address Employee Offboarding Requirements Before the Departure
Employee offboarding requires decisions that cannot always wait until the next payroll cycle. Reviewing payment obligations before the separation meeting gives employers time to resolve questions and prepare accurate paperwork. Benefits deadlines deserve the same advance attention.
Reynolds + Rowella’s HR consulting team can help businesses review their employee offboarding practices and coordinate the administrative requirements of a departure. When legal questions arise, that work should be supported by employment counsel.
Contact Reynolds + Rowella to discuss your employee offboarding process and HR needs.
