Legal Termination Guide: How to Fire a US Employee Without a Lawsuit

Terminating a US employee is one of the most legally consequential actions an international employer can take. Get it right, and you protect your business, preserve your reputation, and move on.

Get it wrong, and you are facing a wrongful termination claim that costs between $75,000 and $125,000 to defend through discovery alone, before any settlement or damages are paid, according to employment law analysis published by Workforce.com and confirmed by multiple legal sources.

For companies expanding from Europe, the UK, or further afield, the US termination process is a culture shock. At home, dismissal often requires documented grounds, notice periods, and structured procedures. In America, the at-will doctrine technically allows you to end employment at any time and for any legal reason. But that flexibility comes with a web of federal and state requirements that can create significant liability if you do not follow them precisely.

Foothold America has helped hundreds of international companies establish and manage US employment operations since our founding in Boston. Our advisors work with European, UK, and global businesses at every stage of the employment lifecycle, including terminations. This guide reflects what we see in practice with international clients navigating the US system for the first time.

This guide is written specifically for international employers managing US employees. It covers what the law requires, what the courts scrutinize, and what practical steps protect you from a lawsuit.

This guide is for informational purposes only and does not constitute legal advice. Foothold America is not a law firm. Always consult a qualified US employment attorney before terminating an employee, particularly in complex situations.

Understanding At-Will Employment and Its Limits

The foundation of US employment law is the at-will doctrine. In 49 of the 50 US states, either the employer or the employee can end the employment relationship at any time, for any reason, or for no reason, as long as the reason is not illegal. Montana is the only exception: under the Montana Wrongful Discharge from Employment Act (WDEA), once an employee completes their probationary period (six months by statute, unless the employer specifies otherwise), termination requires good cause.

At-will employment gives international employers flexibility they are not used to at home. But it does not mean you can fire anyone for anything. The significant exceptions to the at-will doctrine are where most wrongful termination lawsuits originate.

Illegal reasons for termination include:

• Discrimination based on protected characteristics: race, color, national origin, sex, religion, age (40+), disability, or genetic information under Title VII of the Civil Rights Act, the Americans with Disabilities Act (ADA), and the Age Discrimination in Employment Act (ADEA)
• Retaliation for filing a discrimination complaint, reporting workplace safety violations, exercising rights under the FLSA, or whistleblowing
• Termination in violation of a written employment contract, offer letter, or employee handbook that implies job security
• Violations of state public policy, such as firing an employee for serving on jury duty or refusing to commit an illegal act

For a full breakdown of at-will employment and its state-specific applications, read our guide on at-will employment for foreign companies.

Step 1: Build the Paper Trail Before You Terminate

The single most important thing you can do before terminating a US employee is documentation. Employment attorneys and courts are not looking for evidence that you had a reason to fire someone. They are looking for evidence that the reason was consistent, non-discriminatory, and applied fairly.

Documentation that protects you includes:

• Performance reviews that accurately reflect performance issues over time, not inflated ratings that contradict the reason for termination
• Written warnings that clearly state the performance or conduct problem, the improvement required, the timeline, and the consequence of failure to improve
• A Performance Improvement Plan (PIP) for performance-based terminations, giving the employee a structured opportunity to meet expectations
• Records of progressive discipline: verbal warning, written warning, final warning, and termination for conduct issues
• Consistent application: evidence that similar conduct or performance issues were treated the same way for other employees

“The most common mistake we see from international companies is the mismatch between what the performance review says and what actually led to the termination,” says Angelique Soulet-Bangurah, PHR, Head of Employer of Record Services at Foothold America. “If the final review says ‘meets expectations’ and then you fire someone a month later, you have a problem. The documentation has to tell the same story as the decision.“

One critical warning for international companies: US employment law does not require a performance improvement plan before termination in most cases. But courts view PIPs and progressive discipline as evidence of good faith. Skipping these steps is not illegal. It is just riskier.

For comprehensive guidance on what your employee handbook should and should not promise, read our blog on employee handbook essentials for multi-state US HR.

Step 2: Confirm the Termination Decision Is Legally Defensible

Before you schedule the termination meeting, run through these questions. If any answer gives you pause, consult a US employment attorney before proceeding.

Check for red flags:

• Did the employee recently file a discrimination or harassment complaint, or participate in an investigation? Terminating them now creates a retaliation claim.
• Did the employee recently take FMLA leave, pregnancy leave, or another legally protected leave? Timing matters. Courts look at proximity between protected activity and termination.
• Is the employee over 40? Age discrimination claims under the ADEA are among the most common wrongful termination filings.
• Has the employee recently raised a pay or wage complaint? Terminating them now triggers scrutiny under the FLSA.
• Are you treating this employee consistently with how you have handled similar situations for other employees of different races, genders, or backgrounds?

If the employee belongs to a protected class and was recently involved in a protected activity, that does not mean you cannot terminate. It means you need your documentation to be particularly strong and the business reason to be well established.

Step 3: Conduct the Termination Meeting Correctly

The termination meeting is where international employers most often make costly mistakes, particularly those from cultures where directness is valued and difficult conversations are handled differently than in the US.

The fundamentals of a legally defensible termination meeting:

• Have a witness present. This should be a member of HR or a senior manager who is not the direct line manager. The witness protects you from “he said, she said” disputes about what was said or promised.
• Keep it brief and factual. The decision has been made. State the reason clearly and concisely. Do not enter into a debate about the merits or litigate the employee’s performance in the meeting.
• Do not apologize excessively or suggest the decision might be revisited. This creates confusion and can be used against you.
• Do not terminate on a Friday afternoon. This is a common practice, but it leaves employees unable to access support over the weekend and tends to increase emotional escalation. Mid-week terminations are generally better managed.
• Have all documentation ready: the termination letter, information about final pay, COBRA notice (where applicable), and any severance agreement for the employee to take away.

State the reason for termination but keep it simple. “Your employment is being ended due to [specific reason, e.g., performance not meeting the standards outlined in your performance improvement plan].” You are not required to provide a detailed justification, and lengthy explanations increase the risk of inconsistencies.

Step 4: Understand Your Final Paycheck Obligations

This is where international employers frequently face compliance violations, because the rules vary significantly by state and there is no single federal deadline beyond what the Fair Labor Standards Act (FLSA) requires.

Final paycheck requirements by situation:

Source: State Department of Labor guidance. Requirements are subject to change; verify with a US employment attorney for your specific state.

The final paycheck must include all earned but unpaid wages, any accrued and unused vacation time (where state law requires payout), commissions earned, and overtime. In California, Massachusetts, and several other states, accrued vacation is treated as earned wages and must be paid out at termination. Not all states require this.

Withholding a final paycheck, even briefly, to recover company property or as leverage creates significant legal exposure. In California, for example, employers who willfully delay a final paycheck face a waiting-time penalty of one day’s wages for every day of delay, up to 30 days.

Our guide on US severance pay laws and state requirements covers what you are and are not required to pay beyond the final paycheck.

Step 5: Issue the COBRA Notice

If your company has 20 or more employees and provides group health insurance, federal law requires you to notify terminated employees of their right to continue health coverage under COBRA (the Consolidated Omnibus Budget Reconciliation Act). 

The timeline works in two steps: the employer must notify the plan administrator within 30 days of the qualifying event, and the plan administrator then has 14 days to send the election notice to the employee. If the employer is also the plan administrator, the total deadline is 44 days from the qualifying event. Full guidance is published in the US Department of Labor’s employer guide to COBRA.

COBRA allows former employees to maintain the same health coverage for up to 18 months, but at their own expense plus a 2% administrative fee. Failing to provide timely COBRA notification can expose you to penalties of up to $110 per day per affected beneficiary under ERISA, plus possible lawsuit by the employee.

Some states have their own continuation coverage laws that apply to smaller employers. California’s Cal-COBRA applies to employers with as few as 2 employees. New York, New Jersey, and several other states have equivalent programs. The rules vary, so confirm which requirements apply in the states where you have employees.

For a full explanation of how COBRA works, read our blog on what is COBRA.

Step 6: Handle Severance Carefully If You Are Offering It

There is no federal law requiring severance pay for individual terminations. Most international employers are surprised by this. Under US law, severance is discretionary unless your employment contract, employee handbook, or established company policy has created an expectation of it.

That said, many companies offer severance for several practical reasons: to ease the transition, to maintain goodwill, or more commonly, to obtain a signed separation agreement that includes a release of claims.

If you ask the employee to sign a release of claims in exchange for severance, federal law has specific requirements under the Older Workers Benefit Protection Act (OWBPA), as explained by the EEOC:

• Employees over 40 must be given at least 21 days to consider the agreement (45 days if termination is part of a group layoff) and 7 days to revoke their signature after signing.
• The release must specifically reference rights under the Age Discrimination in Employment Act.
• The employee must be advised in writing to consult an attorney.

Failing to comply with OWBPA requirements means the release is unenforceable. The employee could sign it, take the severance, and still sue you for age discrimination.

For state-specific severance requirements, particularly for mass layoffs, read our guide on US severance pay laws.

Step 7: Know the WARN Act if You Are Making Multiple Redundancies

If you are terminating multiple employees at once, the federal WARN Act (Worker Adjustment and Retraining Notification Act) may apply. The US Department of Labor’s WARN Act guidance confirms that employers with 100 or more full-time employees must provide 60 days’ written notice to affected employees, state agencies, and local government officials before:

• A plant closure that affects 50 or more employees, or
• A mass layoff affecting 500 or more employees, or 50 to 499 employees if that represents at least 33% of the workforce

Several states have their own WARN laws with lower thresholds and longer notice periods:

• California: applies to employers with 75 or more employees; requires 60 days’ notice
• New York: requires 90 days’ notice; applies to employers with 50 or more employees
• New Jersey: requires 60 days’ notice plus mandatory severance for qualifying mass layoffs

Employers who violate the WARN Act are liable for up to 60 days of back pay and benefits per affected employee. State penalties are additional and separate.

The Most Common Mistakes International Employers Make

Foothold America works with international companies across all stages of their US employment lifecycle. These are the termination mistakes we see most often, and the ones that most reliably end up in litigation.

1. Terminating without documentation Acting on at-will flexibility without a paper trail is the fastest route to a wrongful termination claim. Courts look for documentation first.
2. Timing a termination too close to a protected event Firing someone one week after they filed an HR complaint, returned from FMLA leave, or raised a pay dispute looks retaliatory even when it is not. The timing creates the narrative.
3. Treating the terminated employee differently from others If a manager has overlooked the same conduct in other employees, terminating one employee for it, particularly if that employee is in a protected class, invites a discrimination claim.
4. Making promises in the termination meeting “We will give you a good reference,” “This has nothing to do with your performance,” and “The role might come back” are all statements that can create legal liability. Keep the meeting brief and factual.
5. Getting the final paycheck wrong Late payment, missing accrued vacation, or withholding wages for unreturned equipment creates a separate wage claim on top of any wrongful termination claim.
6. Skipping the COBRA notice International employers often do not know the COBRA notice requirement exists. The penalties for missing it are automatic and significant.

“International companies often approach US terminations the way they would handle them at home,” says Laurie Spicer, Director of US Expansion at Foothold America. “The instinct is to be kind, to soften the message, to say things that feel supportive. But in the US, what you say in that meeting becomes evidence. We spend a lot of time coaching managers on what to say and what not to say before the conversation happens.“

Laurie Spicer, Director of US Expansion

What Happens If You Get It Wrong

Defending an employment lawsuit through discovery alone costs between $75,000 and $125,000, according to employment law analysis from Workforce.com, before any settlement or jury verdict. Wrongful termination settlements typically range from $5,000 to $80,000, with cases involving discrimination or retaliation regularly reaching higher. Some jury verdicts exceed $1 million.

Beyond the financial exposure, wrongful termination claims attract EEOC investigation, state agency involvement, and potential class action risk if the conduct reveals a pattern. They also damage your ability to recruit and retain US talent.

The calculation for international companies is straightforward: the cost of getting termination right is a fraction of the cost of getting it wrong.

How Foothold America Supports Compliant Terminations

Foothold America is not a law firm and does not provide legal advice. What we do is build and maintain the HR infrastructure that makes compliant terminations possible: employment letters drafted with US-standard language, employee handbooks that do not inadvertently create job security promises, and HR support that ensures documentation is maintained throughout the employment lifecycle.

Our team includes professionals with direct experience across US employment compliance, EOR operations, and HR advisory for international companies.

Angelique Soulet-Bangurah PHR, Head of EOR Services, holds a Professional in Human Resources certification and manages employer compliance obligations for international businesses operating across multiple US states.

Laurie Spicer, Director of US Expansion, has guided hundreds of European companies through the practical and legal realities of US employment.

Joanne Farquharson, President and CEO, has over 30 years’ experience advising small and medium-sized businesses on US labor law compliance, insurance, and risk management.

If you manage employees through our Employer of Record service, we handle the compliance infrastructure and connect you with US employment attorneys when termination decisions require legal review.

If you have your own US entity and manage employees directly through our PEO+ Cross-Border Support, our HR team works alongside you to make sure every step of a termination process is documented, timed correctly, and legally defensible.

For questions about managing your US employment compliance, contact Foothold America.

This article is for informational purposes only and does not constitute legal, employment, or HR advice. Foothold America is not a law firm. Please consult a qualified US employment attorney for guidance specific to your situation and jurisdiction.