Terminating an employee is not easy, but understanding the law can help you avoid pitfalls and common mistakes.

As General Counsel to small and mid-sized businesses in Illinois, I have had to address how to terminate an employee. It is important to understand that Illinois is an “employment at-will” state, meaning that an employer or employee may terminate the relationship at any time, without any reason or cause. The employer, however, cannot discriminate based on race, color, religion, sex, national origin, ancestry, citizenship status, age, marital status, physical or mental handicap, military service or unfavorable military discharge. In other words, an employee can be terminated for a good reason, or without a reason given, but not for a bad reason.

 Beyond that very general guideline, there are several areas that are the most common sources of confusion, including Paid Time Off, Bonuses, Sick Pay, Holiday Pay, and Unemployment Benefits. It is important to understand these areas because employees sometimes make demands believing they are entitled to more than what the law actually requires. An uninformed employer can end up wasting time and money addressing these issues.

Severance pay is almost always misunderstood. In several instances at different clients, an employee decided to quit and demanded severance pay, claiming the employer was legally obligated to give them at least two weeks pay. However, under Illinois law, there is no automatic right or entitlement to severance pay.

Employers often ask their attorneys to communicate with employees about the termination process and what the employee can expect to receive and not receive. Nothing is more sobering to an employee making unsubstantiated demands than a letter from an attorney. To be clear, I do not enjoy the process of terminating employees. But I have had clients with employees who demanded pay (severance, sick, bonuses) far in excess of what they deserved. Once I explained the law (and the employee received a letter from my office), that same employee was more likely to walk away quietly, allowing the business owner to focus on operations and not waste any more time on inflated claims.

Note that where a properly executed employment contract exists, the outcome may be different. In the majority of situations, no contract exists. And if it sounds like too much work or too expensive to have an employment contract, consider that the alternative can cost much more time and money.

The next time you need to dismiss an employee, make sure you know the law.