Terminations are complex, often triggering emotional, legal, and administrative challenges for employees and employers. When post-termination questions go unanswered or lack clarity, the offboarding process can become unnecessarily lengthy and contentious, which in turn can lead to increased legal costs for both parties. When employee’s counsel doesn’t have access to the employee handbook or the full set of termination terms, how can discussion and negotiations proceed efficiently? Without a shared understanding of the rules, post-termination discussions inevitably drag on longer than necessary.
By proactively drafting and regularly reviewing employment agreements, employers can set clear expectations and reduce disputes. This article outlines strategies for creating transparent, well-structured agreements that protect both the organization and its reputation.
Bonus and PTO Payouts: Define the Rules Early
One of the most common sources of post-termination disputes involves compensation—specifically, bonuses and paid time off (PTO). You should clearly state whether these benefits are prorated, forfeited, or considered unearned upon termination. This is especially critical in industries where performance metrics drive bonus eligibility.
In healthcare, for example, relative value units (RVUs) are used to quantify the value of services for reimbursement. If an employee’s bonus is tied to RVUs, the agreement should specify how those units are calculated upon termination and whether partial performance qualifies for payout. Including terms for bonuses and PTO at termination—specifically whether they are prorated or forfeited—directly in the employment agreement rather than including them only in the employee handbook makes these provisions transparent and accessible. These clear terms not only simplify negotiations but also can often prevent the need for legal counsel involvement altogether.
To help reduce the risk of conflicting interpretations or needless questions post-termination from employee’s counsel, integrate key payout terms directly into employment agreements or termination letters. You should avoid vague references to employee handbooks, which may be outdated or inaccessible. A simple blanket statement or summary that addresses the company’s general policies on payment of bonuses or PTO at termination can help provide clarity to an employee and/or their counsel, which in turn can save time and cost for the company’s attorney or general counsel.
Technology Use at Termination: Balance Security and Practicality
Departing employees often need access to work materials to update resumes, compile portfolios, or transition to new roles. However, this need must be balanced against your obligation to protect confidential data.
Employment agreements should include clear rules about what, if anything, can be transferred from work devices to personal accounts. This is good practice not only at termination but during employment as well. For example:
- Are employees permitted to email themselves work samples?
- What constitutes a violation of data security?
The answers to the above questions will be different based on the industry. Best practices include creating a secure offboarding protocol that allows reasonable access to nonsensitive materials while safeguarding proprietary information. Consider using digital tools that automatically restrict or revoke data access when an employee’s termination is processed.
Policy Accessibility and Integration: Don’t Rely Solely on Handbooks
Many employment agreements defer to employee handbooks for policy guidance. However, employees often don’t have access to handbooks, and handbooks may not have been updated since onboarding or may otherwise not reflect current practices. This can lead to confusion when employees seek clarity during termination.
To avoid this, you should embed essential policies directly into employment agreements or create a termination checklist that outlines key rights and restrictions. This checklist can include:
- Final paycheck timing;
- Bonus and PTO treatment;
- COBRA or benefits continuation;
- Return of company property; and
- Noncompete or confidentiality obligations.
Including these elements helps align employees and HR on expectations, minimizing the need for last-minute legal intervention.
Bottom Line
By front-loading clarity into employment agreements, you can avoid messy post-termination requests, reduce legal exposure, and ensure a smoother transition for both parties. Employment agreements should be reviewed regularly to address issues that have arisen during prior terminations. Ultimately, proactive drafting is not just a legal safeguard—it’s a strategic investment in organizational stability and employee trust.
Tracy J. Murn is a partner with Axley LLP in Waukesha, Wisconsin. She can be reached at 262-409-2294 or tmurn@axley.com.