Terminating employees in the US: at-will, final pay, WARN Act

A German company can usually end the employment of a US employee without the dismissal protection and notice periods it knows from Germany, because private-sector employment in the US is at will in every state except Montana. That is only a default. The reason for the termination must not be illegal, a contract or written policy can change the position, and federal and state rules still govern final pay, separation agreements (severance and release), mass layoffs under the WARN Act, unemployment insurance and COBRA health coverage. This guide explains each of these for a German employer.

Quick answer

Can you terminate an employee in the US at any time?

In most cases yes, but the answer has conditions. USAGov states that all states except Montana allow at-will employment, which means an employer or employee can end the employment at any time and for any reason, as long as the reason is not illegal. USAGov also says that at-will employment may not apply to employees who work under a signed contract, and that federal and state agencies have laws about how and when employees can be fired.

At the federal level, the Fair Labor Standards Act (FLSA) is silent on the point. The Department of Labor (DOL) states that the FLSA has no requirement for notice to an employee before termination or lay-off. A California agency adds that, unless the parties have agreed otherwise, no notice is required from either side.

Do not map the German concepts of Kündigungsfrist, Kündigungsschutz and Abfindung mechanically onto US law. Check the employment contract and the federal, state and local rules that apply to the specific termination.

What does at-will mean in practice?

Maryland’s labour department describes the idea in its own terms: in the absence of an express contract, agreement or policy to the contrary, an employee may be hired or fired for almost any reason, whether fair or not, or for no reason at all. That state-level explanation is only a starting point. Check the contract and every applicable federal, state and local protection before acting.

Two practical points follow. First, read the written employment contract and any written personnel policy, because they can change the default. Montana is different: its statute lists specific wrongful-discharge grounds. The no-good-cause ground applies after the employee completes the employer’s probationary period, while the statute permits at-will termination during probation on notice. Second, do not apply what one state says to another; we make no statement about states not mentioned here.

When is a termination unlawful?

At-will employment does not permit an illegal reason. USAGov lists, among others, discrimination based on race, sex, age (40 and over), national origin, disability or genetic information, and retaliation for reporting illegal or unsafe workplace practices. Maryland adds laws that protect employees from termination for filing workers’ compensation claims or for trying to enforce rights to overtime or the minimum wage.

A foreign employer is not outside these rules. The EEOC states in its 1993 guidance that Title VII applies to a foreign employer when it discriminates within the United States, and that the Americans with Disabilities Act (ADA) generally does so too, subject to any treaty. Coverage depends on size: an employer is covered for most characteristics with 15 or more employees, and for age with 20 or more, according to the EEOC. Below these thresholds a state or local law may still apply.

Retaliation is a separate risk. The EEOC says it is unlawful to retaliate against someone for filing or being a witness in an EEO charge, complaint, investigation or lawsuit, while EEO activity does not shield an employee from all discipline or discharge. OSHA states that workers can report safety concerns without being punished and can file a whistleblower complaint within 30 days of the retaliation (for the complaint described on its page). Document the real reason for a termination before you act, and take care if the employee has recently complained.

When must final pay be paid?

There is no single federal deadline. The DOL states that employers are not required by federal law to give former employees their final paycheck immediately, and that some states may require immediate payment. The rule therefore depends on where the employee worked. The three states below are examples only; we reviewed no other state, and the DOL page we found does not list final-pay deadlines.

The New York wording differs between the statute and the Attorney General’s page, and we quote each as it stands. The Texas source is an agency guide, not the statute text. Confirm the deadline in the state where the person worked and check the payroll cut-off in advance. Unused-vacation payout can depend on state law and the employer’s policy; see vacation and holidays in the US.

What is a separation agreement?

A separation agreement is a contract setting termination terms. A release requires consideration, meaning value beyond an existing entitlement. Federal FLSA law does not itself require severance, but a contract, plan, state rule or another law may create a duty, and the WARN Act is a separate notice law.

If the employee is 40 or older and the release is to cover age claims, federal law sets formal conditions for the waiver. According to 29 U.S.C. 626(f) and the EEOC, the waiver:

• must be written in a manner calculated to be understood and refer specifically to rights or claims under the age discrimination law;
• must advise the individual in writing to consult an attorney;
• must not waive claims that arise after the waiver is signed and must provide consideration beyond an existing entitlement;
• must give the individual at least 21 days to consider the agreement, and at least 7 days after signing to revoke it; and
• must give at least 45 days to consider where it is offered to a group as part of an exit incentive or termination programme, together with the required decisional-unit, eligibility, time-limit, job-title and age disclosures.

These are selected requirements, not a substitute for the full statute. For non-ADEA claims, the EEOC says the knowing-and-voluntary test comes from case law and depends on the circumstances; consideration, future-rights limits and other applicable federal and state law also matter. An employee cannot waive the right to file a charge with the EEOC or take part in its process. Have a US lawyer in the employee’s state draft the agreement.

What does the WARN Act regulate for mass layoffs?

The Worker Adjustment and Retraining Notification (WARN) Act requires advance notice for qualifying plant closings and mass layoffs. Under 29 U.S.C. 2101, a covered business enterprise generally has 100 or more employees excluding statutory part-time employees, or 100 or more employees who together work at least 4,000 hours a week exclusive of overtime. A plant closing is a qualifying shutdown at a single site that causes an employment loss during a 30-day period for 50 or more employees, excluding statutory part-time employees. At a single site, a qualifying mass layoff generally involves employment loss for at least 50 employees, excluding statutory part-time employees, and at least 33 percent of the relevant workforce, or at least 500 such employees.

Under 29 U.S.C. 2102 an employer may not order a plant closing or mass layoff until 60 days after it has served written notice. Shorter notice is allowed in limited cases, such as a faltering company, business circumstances that were not reasonably foreseeable or a natural disaster, and these exceptions come with conditions, so do not plan around them. The DOL Employment Law Guide, a page updated in 2018, describes the same 60-calendar-day rule.

States can add their own rules. The New York Attorney General states that covered businesses must give at least 90 days of notice before a plant closing under the New York WARN Act. We did not review which employers the New York law covers, whether several US affiliates of a German group are counted together, the definition of employment loss, remedies or other state laws, so a German group with US staff in several entities should ask a US adviser early.

What happens after the termination?

Two federal programmes matter for the employee, and you should expect questions about both.

Unemployment insurance. The DOL describes unemployment insurance as a joint state-federal programme that provides cash benefits to eligible workers, administered separately by each state. Eligibility includes being unemployed through no fault of your own, and a claim is filed with the programme of the state where the person worked. According to the DOL fact sheet, in the majority of states benefit funding is based solely on a tax imposed on employers. Eligibility rules, amounts and duration are set by each state, and we do not give figures.

COBRA. For a covered group health plan, voluntary or involuntary termination other than gross misconduct can be a qualifying event if it causes loss of coverage. The DOL says COBRA generally applies to plans sponsored by employers with 20 or more employees in the prior year. The usual maximum coverage period after termination is 18 months, and the election period is at least 60 days, measured from the later of the loss of coverage or receipt of the election notice. Confirm plan coverage, premiums and exceptions with the administrator.

What does this mean for your hiring model?

The termination rules differ by model, so choose the model before you hire and not when the relationship ends. For the general comparison, see hiring employees abroad: employee, contractor or EOR. The classification of the worker comes first, see W-2 vs 1099: US employee or contractor. For the whole US picture, start with the US hub, the guide to hiring in the United States from Germany and the wider rules in US employment law for German companies.

When may an EOR help?

Under Deel’s documented workflow, the client selects Deel as legal Employer of Record (EOR). Confirm payroll responsibilities, daily-work control and termination roles in the governing documents for the specific state and employing entity. Ask in writing who decides on and carries out the termination, who pays the final wages and who handles any separation agreement or layoff notice. See what an Employer of Record is.

In Deel’s dated EOR workflow, Deel is selected as legal EOR. The flow asks for country, location, visa needs, title, seniority, job scope, compensation and work arrangement, and it includes role and location restrictions before quote and agreement review. Obtain written confirmation for the exact US state, locality, role and employing entity, and ask for the termination process in the same document.

If the model fits after comparison, plan a US hire with Deel (opens in a new tab). Compare the response with your own payroll and a US entity.

When may an EOR not fit?

An EOR may not fit when the person is a genuine independent contractor, when you already have a US subsidiary with payroll, when the provider does not accept the role or state, or when the activity needs a lasting presence of the company in the US. Possible alternatives include a US entity and, where available after state and federal registration and payroll review, direct employment by the foreign company; see US payroll for German companies. Using an EOR does not by itself answer which termination duties apply or whether the German company creates a US taxable presence. Obtain a fact-specific employment and tax review.

Further reading

• United States: overview for German employers
• Hiring in the United States from Germany
• US employment law for German companies
• W-2 vs 1099: US employee or contractor
• Vacation and holidays in the US
• US payroll for German companies
• Posting employees to the US

Key terms

Employee

A worker engaged under a local employment contract, with the employer responsible for payroll, social security contributions and compliance with local labour law.

Contractor

A self-employed individual or business engaged for specific services under a commercial contract, without the employment protections or payroll obligations that apply to employees.

Employer of Record (EOR)

A third-party provider that legally employs a worker on behalf of a client company in a country where the client has no local entity, handling local payroll, contracts and compliance.

Permanent establishment

A tax concept describing a fixed place of business or sufficient business activity in a country that can trigger local corporate tax obligations for a foreign company.

Misclassification

Treating a worker as a contractor when, based on the actual working relationship, local law would classify them as an employee, which can create back taxes, penalties and employment claims.

Final checklist

• Read the employment contract and any written policy before relying on the at-will default.
• Identify the state where the employee worked and do not apply another state’s rules.
• Document the actual reason for the termination and check it against the illegal reasons and retaliation rules.
• Confirm the final-pay deadline of that state and plan the last payroll run accordingly.
• If you offer a separation agreement, have a US lawyer draft it and keep the 21, 7 or 45 day periods for age claims.
• Count the employees and sites involved and check the WARN Act and any state notice rule before a larger layoff.
• Prepare the unemployment insurance and COBRA information for the employee.
• If an EOR remains appropriate, ask Deel about EOR options for a US hire (opens in a new tab) and compare the written answer, including who runs the termination process, with an alternative.