I recently helped a friend of a friend navigate a tricky startup termination and the process made me realize just how little most of us know about our rights in this area.
As an HR professional, I'm pretty well versed both in my rights as an employee and the duties I need to carry out on behalf of a company when letting someone go. But not all operations folks work in HR! And not all startups have HR.
The only thing worse than being let go by your company is not knowing how to navigate the situation. Is this being handled legally? What can you negotiate? What's standard?
I've put together my advice and best practices below in an effort to help out any community members who may find themselves in this situation—on either side of the table.
🛑 Level set your expectations
Companies in the United States are generally at-will employers. This means employees can be terminated at any time, for any reason that's not illegal. (Illegal reasons include firing you because you belong to a protected class based on your race, religion, age, etc.)
Terminations are usually grouped into two categories: voluntary (e.g. you quit) and involuntary (e.g. you are fired or laid off).
This article is primarily for folks who are involuntary terminated for something other than gross misconduct, e.g. low performance, changing business needs, etc.
I've generalized a lot of the info here to make it useful for most people residing in the US, but I'm not an employment lawyer. Your mileage may vary based on your company, industry, state, and unique situation. My hope is that you can use this article as a starting point for your own research.
❓ Be clear on why you're being terminated
Maybe you've been on a performance improvement plan, maybe you're all in agreement it's just not the right fit anymore, but maybe you were also totally blind sighted? Regardless of the situation, make sure you're as clear as you can be on why you're being let go.
In a perfect world, an employer should be able to give you clear feedback about why it didn't work out so that you can decide whether it's something to keep in mind for future roles.
Even if the company is being vague out of an abundance of caution, you want to make sure that you're aligned on two key pieces: whether this termination was voluntary, and whether it was due to gross misconduct. These are details that it's best to be very clear on, as they affect your eligibility for unemployment benefits.
🧵 Severance comes with strings attached
A severance package can help soften the blow of being terminated and usually consists of some amount of salary and health benefits that can help bridge any employment gap.
Companies generally aren't required to offer severance but, when they do, it's usually 2-3 weeks of salary per year of employment at the company.
I'm of the opinion that all startups should offer severance in almost every situation because it fosters goodwill among both the departing employee and the rest of the team, and helps protect the company's reputation and data.
This is because companies usually offer severance in exchange for asking the employee to sign a severance agreement that ensures they won't badmouth the company, sue them, poach employees, etc. Companies are also required to give employees time to review the agreement—21 days is best practice for everyone, and required for anyone who is over the age of 40 or part of a group termination.
Severance agreements are usually negotiable, especially if you're a tenured employee who did nothing wrong. Your company wants you to leave on good terms, which means leaving your projects in a good place, returning equipment in a timely manner, not Slack bombing them on the way out, etc. As an employee, this is all leverage for negotiating the terms of your departure.
🩺 Be strategic about your health insurance
Health insurance is a key piece of a US-based compensation package, and should be a key consideration when negotiating your exit too.
If your company offers you insurance now, they can't take it away before your last day. And, even when it is cancelled, insurance premiums usually aren't pro-rated so coverage likely runs until the end of the month. Keep this in mind when picking your official last day!
For example, let's say your company gives you two weeks notice and wants your last day to be April 30th. It might be a better idea to negotiate for May 2nd because then your coverage will likely run (and be fully paid for) through May 31st versus April 30th.
After your last day, you're likely still entitled to health insurance coverage through an act called COBRA. This applies to anyone at a company with more than 20 employees and it allows you to stay on the exact same health plan for up to 18 months (sometimes longer) by taking over the cost yourself. Sometimes you can negotiate for the company to cover a couple months of your insurance premiums as part of your severance agreement but, even if you have to pay for your premiums in full, this may still be cheaper than a private insurance plan.
When exploring insurance options, check out your spouse or partner's coverage, if that's available to you. (Or your parents', if you're under the age of 26.) You can also review options on the federal health insurance marketplace, or your state exchange.
Losing a job and starting a new one both count as a Qualifying Life Event (QLE) under the Affordable Care Act (ACA). This allows you to enroll in new coverage outside of any open enrollment period, and then cancel if/when you find a new job that has better insurance. Plans might be cheaper and/or better than what your company offers you through COBRA.
🏖️ Check on your PTO
Some states consider Paid Time Off (PTO) to be part of your compensation package just like salary, and so they require that employees be paid out for unused PTO that has already been accrued. This is true in California, New York, Illinois, and lots of other states.
You can Google, "does [State] require PTO payout" to find out if there's a law for how your company must handle unused vacation time for departing employees. The particulars vary a lot state to state so read the fine print closely.
If there is, you next want to check your company's PTO policy to see if or how vacation is accrued. Some companies don't specify how vacation is accrued, in which case you're probably due to be paid out for the full amount minus any days you've already taken. If they do specify how vacation is accrued, you should be able to check your most recent pay stub to see how much unused time you've accrued.
The value of your unused vacation can be calculated like so: (Annual salary / 52 weeks / 5 days) * number of unused days. Keep in mind that this is pre-tax though!
Also, startups that offer "unlimited" vacation don't have to pay you out no matter where you live because your vacation isn't quantifiable.
💾 Immediately save your work
Clone your docs, export your Notions, go through your contacts, and otherwise save everything you think you might possibly want. (Within your company's data policies, of course!)
You never know when your access to tools will be cut off so it's a good idea to do this early. You don't want to be without crucial work samples for your portfolio, or the metrics that are going to look great on your resume or LinkedIn. And there might even be external vendors you want to be able to contact in the future.
If you're discussing the details of your termination or severance via your company email, I also recommend forwarding yourself those emails so you can reference them later.
🤝 Ask for references
If you're leaving on good terms with your boss and/or the people you worked closest with, now is the perfect time to ask if they would consider being a reference. You can ask them to write you a LinkedIn recommendation or, just confirm that it's okay for you to reach out in the future if the need arises.
It's always easiest for people to say yes when you ask them way ahead of time, especially when they know you've just been laid off and want to help. Take advantage! In a nice way of course. 😏
Are there other things that employees should keep in mind when dealing with a termination?
Let's all help each other out. 💪🏻