Follow State and Federal Laws After Terminating an Employee
You may unknowingly break the law each time you fire or lay off an employee. That’s because there are several state and federal laws that employers must follow when they terminate an employee. These laws involve a lot of paperwork, especially if the terminated employee participated in a group health insurance plan. Owners may be unaware of these laws or unsure of their requirements. But it’s important to be aware of these laws because owners can get hit with hefty fines and even lawsuits if owners fail to comply.
To make certain you don’t break the law, here’s an overview of some laws you need to know about.
Give Written Notice of Employment Termination
What’s required. The state’s notice of termination law requires you to give the ex-employee a written notice of termination. The notice must state: (1) the date that the employment relationship was terminated; and (2) the date that any employee benefits offered by the employer were or will be cancelled due to the termination. Under New York Labor Law Section 195(6), this written notice must be provided within five working days after the employment relationship has ended. This notice requirement applies not only to those employees whose employment is terminated by the employer, but also to those employees who leave the employer because they resign, quit, retire, or are laid off.
How to comply—non-union employees. The notice may be either hand-delivered or mailed. If you’re mailing it, send the notice by certified mail, return receipt requested.
How to comply—union employees. The notice to union employees also may be hand-delivered or mailed. It should state both the employee’s termination date and the date the employee’s union health benefits expire. These notices also should instruct the union member to contact the union health fund administrator as soon as possible to arrange for continued insurance coverage. We’ve prepared a Model Notice: Notice of Termination for Union Employee, which you can adapt and use in this situation.
If you were to fire a superintendent, you have five business days after firing the super to provide him with a written statement of reasons for dismissal, and 30 days from then to get him out of his apartment. (In exceptional cases, the Realty Advisory Board residential contract allows for immediate vacancy.)
Deadline. Mail or hand-deliver the notice within five working days after the date you fire or lay off the employee.
Penalties If an employer fails to provide the notice required under New York Labor Law Section 195(d), the employer can be subject to civil fines of up to $5,000 per employee. In addition, aggrieved individuals can bring civil actions against employers that fail to provide the required notice.
Allow Non-unionized Ex-Employees to Continue Health Insurance
What’s required. You must give a terminated employee the right to continue any job-related group health insurance at the terminated employee’s expense. While the ex-employee pays the full premium (including the employer’s share), he or she gets the advantage of cheaper group rates.
You also must inform a terminated employee that continued insurance coverage is available. If an employee elects to continue to be insured by the group, you must collect premiums from the employee and handle the paperwork. Exactly what’s required depends on the number of employees you have.
> 20 or more employees. A federal law known as COBRA applies if you have 20 or more employees or if your insurance group is subject to COBRA. Ask your insurance carrier if your group is covered by COBRA.
COBRA lets terminated employees pay for continued group health insurance for up to 18 months after leaving the job (or longer if the employee is disabled). You must offer the terminated employee the same insurance package offered to similar employees, including any dental, vision, or prescription plans. You can charge the employee 102 percent of the group rate and retain 2 percent for handling the paperwork.
> Fewer than 20 employees. State insurance law applies if you have fewer than 20 employees who belong to insurance groups not subject to COBRA. Employees are entitled to 36 months of continued health coverage at a monthly cost to employees of 102 percent of the actual cost to the employer.
How to comply. If you supplied group health insurance to the terminated employee, your notice must contain the following information:
- The date group health insurance terminated;
- The employee’s right to get continued group health insurance at his or her own expense (ask your insurance carrier for COBRA notices that explain this right); and
- The cost of continued coverage and the amount of the first premium.
Also, you should notify your health plan administrator of the employee’s termination of employment within 30 days. When the plan administrator is notified, it will, in turn, notify the covered person(s) of the right to choose continuation coverage. If notice is not timely, the group health plan does not have to offer the qualified beneficiary an opportunity to elect COBRA continuation coverage.
Deadline. If your group is subject to COBRA, hand-deliver or mail your notice to the ex-employee within 30 days of termination. If the terminated employee’s spouse was also covered by the group health insurance plan, notify the spouse that continued benefits are available. Employee and spouse then have 60 days to elect coverage.
If you’re subject to the state insurance law, hand deliver or send your notice by mail at least nine days before the date the terminated employee’s health benefits expire. The employee has 60 days to elect coverage after termination or receipt of notice, whichever is later.
Penalty. If your insurance group is subject to COBRA and you fail to notify a terminated employee that continued benefits are available, you can get hit with penalties of up to $110 per day. You also can get sued for payment of the employee’s uninsured medical expenses.
If you’re subject to state insurance law and fail to comply with it, you can get hit with a penalty of up to $5,000. You also can get sued by the employee for reimbursement of medical costs.
Allow Unionized Ex-Employees to Continue Health Insurance
What’s required. All unionized building employees in New York City are covered by the federal COBRA law, which allows terminated employees to continue group health insurance coverage for up to 18 months at their own expense. The union sends a terminated employee the required COBRA notice that continued coverage is available, collects premiums from the employee, and handles the paperwork.
The employer is responsible for notifying the union’s health fund administrator in writing that a union member was terminated.
How to comply. Your letter to the union should include the following information:
● Employee’s name;
● Employee’s Social Security number;
● Date of termination;
● Address of building where employee worked; and
● Union building code (get this from your union fund contribution remittance reports).
Deadline. You should notify the health fund administrator of an employee’s termination as promptly as possible, no more than 30 days after termination. This cuts off the owner’s obligation to make additional health fund contributions on the employee’s behalf. If you wait longer than 30 days, you will be liable for the greater of the contribution rate or the actual cost of benefits for any period during which the fund provides coverage to a former employee as a result of your failure to report the employee’s termination of employment.
Penalty. If you fail to notify the union, you can get hit with penalties of up to $110 per day. You also can get sued for payment of the employee’s uninsured medical expenses.
Give Final Paycheck Promptly
What’s required. The state paycheck law requires employers to pay wages no later than the regular payday for the pay period during which the termination occurred. It’s against the law to “hold” the employee’s paycheck beyond the usual payday, even though the employee’s been fired. The paycheck must be for the full amount of wages owed, including any overtime, minus permissible deductions.
For a deduction to be permissible, the employee must authorize it in writing, and it can only be for “insurance premiums, pension or health and welfare benefits, contributions or payments for United States bonds, payments for dues or assessments to a labor organization and similar payments for the benefit of the employee.” There are many child-related deductions that are allowed, including day care, before-school and after-school care expenses, and tuition and fees for preschool, nursery, primary, secondary, and post-secondary educational institutions. Ultimately, a deduction must be tied to some benefit that applies to the employee.
Deductions are also permissible for the repayment of advances of salary or wages that an employer makes for an employee, and for funds that are related to the recovery of overpayment wages when the overpayment is the result of an employer’s clerical or mathematical error.
Finally, the regulations provide examples of deductions that are not permitted under any circumstances. These deductions include:
- Employee purchases of tools, equipment, and attire required for work;
- Recoupment of unauthorized expenses;
- Fines or penalties for tardiness, excessive leave, misconduct, or quitting without notice;
- Contributions to political action committees, campaigns, and similar payments;
- Repayment of employer losses, such as losses for spoilage, breakage, and cash shortages;
- Fees, interest, or the employer’s administrative costs; and
- Repayments of loans, advances, and overpayments that are not made in accordance with the regulations.
How to comply. Employees whose employment has ended are entitled to be paid no later than the pay day on which their next pay would have been due had they still been employed. Upon request of the employee, employers are required to mail the employee his or her wages. If this is the case, allow sufficient time for the mail to be delivered to the employee to avoid violations of Labor Law Section 191.
Deadline. Pay wages due on the next regular payday.
Penalty. A first failure to pay agreed wages and fringe benefits in accordance with the requirements of the labor law is punishable as a misdemeanor. The maximum penalties include fines of up to $20,000 and imprisonment for up to one year for each violation, as well as payment of restitution.
To minimize your chances of being penalized for not following federal and state laws, keep business records showing how and when you gave your employees each required notice. Write a memo to the employee’s personnel file on the day you mail or deliver any notice to the terminated employee, or to the union health fund administrator. The memo should state the date notice was given, how the notice was given (delivered with final paycheck, sent by mail, etc.), and be attached to a copy of the notice the employee received.
See The Model Tools For This Article
|Notice of Termination for Union Employee|