Written by Attorney Samantha Scott
Most of your employees are probably at-will, meaning you are free to fire or lay-off a team member for any reason, short of discrimination, at any time. But just because you can fire or lay-off employees whenever you want, doesn’t mean you can let them go however you want. When terminating an employee keep these tips in mind:
1. Put it in writing. Providing a written notice is the safest way to make sure that you have clearly documented the termination date.
2. Enforce ongoing obligations. In the written notice mentioned above, you should remind the employee of obligations from their employment agreement that will continue after termination, namely Confidentiality, Non-Solicitation, and Non-Competition.
3. Take care of equity. If the employee was ever granted stock options, you should notify them of how many shares have vested, and remind them that they must exercise the option for vested shares within the time permitted by their equity documents (usually 90 days after termination). If the employee was granted restricted stock, you should notify them that the Company is terminating/repurchasing any unvested shares as provided in the restricted stock agreement.
We get a lot of questions about severance. You aren’t required to pay severance to every employee you fire. It can be used as a gesture of good will, or a bargaining chip to get an employee to sign a release agreement. Such an agreement will release the company from any claims that the employee might have against the company, but in order to be enforceable it must be tied to consideration beyond wages already owed, which is where the severance payment comes in.
If you’re terminating an employee you can generate the letter you’ll need to cover your bases through the Team|Equity portal on the Savvi Legal platform. If there are unique circumstances you’d like to discuss, make a free account and schedule a consultation with one of our attorneys.
Disclaimer: This information does not constitute legal advice; you should consult with your lawyer before relying on any of this information or any other legal information you read online. For legal advice please schedule a consultation with one of Savvi’s partner attorneys.
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