Arizona Termination of Employment Law Basics
When it comes to employment law, the State of Arizona is broadly governed by the doctrine of "employment at will" for Arizona employers. This means that, with some exceptions, Arizona employees are employed with the employee’s and employer’s consent, and can be terminated from employment for any reason, legal or illegal (with some exceptions), and without warning and without cause.
Because the law greatly favors employment at will, an employee must prove the exception, and must prove an employment contract exists, to modify employment at will. In Arizona , an employment contract may be express, meaning the terms of employment are either written or verbally communicated, or implied based on the employer’s promises and/or statements to the employee.
Arizona law does not require employers to enter into written employment contracts, nor does it require that employers provide just cause for the termination of employment. Furthermore, even when there exists a contract for employment, an employer may terminate at will in the absence of express language or express intent of just cause for termination.
Terminating Employees: Legal Reasons Under Arizona Law
The legalities surrounding employee termination in Arizona are essential knowledge for both employers and employees. While Arizona recognizes "at-will" employment, meaning employers can generally terminate an employee without cause unless there is an existing contract stating otherwise, federal, state, and local laws prohibit wrongful termination. These laws prohibit terminating employment on the basis of anti-discrimination laws, such as age, gender, race, national origin, color, disability, and religion. Retaliatory terminations, where an employer terminates an employee after the employee complained about discrimination or Safe workplace laws, are also illegal.
Arizona does recognize that private employers may establish their own potential legal reasons for terminating an employee, though those reasons must be clearly set forth in the policies and procedures handbook. Certain employment contracts can also bind an employer to terminate its employees only for cause, such as an action by an employer that is deemed to have substantially interfered with the normal and expected operations of the company.
Notice Requirements and Final Paycheck
Upon a termination, whether voluntary or involuntary, Arizona law, under A.R.S. ยง 23-353 requires that employers notify the employee of the specific day on which his or her last wages were paid, the amount of such wages, and the date the employee is to be paid the amount of his or her final wages. Note that this notice obligation applies regardless of whether the employee is terminated for just cause or if there is no specific cause for termination. Non-compliance with these notice provisions makes an employer liable for any lost wages due to the delay in receiving his or her final paycheck provided that the employee notifies his or her employer that the employee did not receive his or her final wages on the designated day.
Employers must pay an employee’s final wages within three working days of termination, or on a regularly scheduled payday, whichever is sooner for the employer. If employers do not comply with these requirements, they face increasing penalties which may include an award of attorneys’ fees and costs, interest on all unpaid wages, and an amount equal to the employee’s unpaid wages multiplied by a factor of two. Employers are not required to make deductions from any final paycheck such as deductions for damages to company property, uniforms or other company-provided items unless the employee has specifically authorized such deduction or, for example, if the employee stole or embezzled from the employer.
Termination/Severance Agreements and Severance Pay
Severance, Termination Agreements, and Consideration
Arizona law does not require employers to provide compensation upon termination of employment (i.e. "severance"). Sometimes an employer may enter a severance agreement with an employee upon termination. Severance agreements should be in writing and should be signed. If the employee is represented by counsel he or she should sign a power of attorney allowing that attorney to sign on his or her behalf. In order for a termination agreement to be enforceable, there must be "consideration." Consideration is an offer or incentive. An employment agreement generally provides for consideration. The employment itself is the consideration – meaning that the employee received something (the job) when he or she accepted employment. By signing the termination agreement, the employee gave up the consideration. In other words, the agreement would be like saying, "I will agree to leave my job tomorrow if you agree to pay me $5000 now." There are some reasons for wanting to enter a separation agreement with an employee. For example: At times, in order to avoid employment litigation, and at the request of the employee, an employer may decide to give an employee severance pay in exchange for the employee’s release of claims. In this situation, the employer is trying to avoid a potential liability . The release of claims/consent to waiver information in the termination agreement should be very clear as it is most often the most important consideration for the employee giving up the right to receive any severance pay or benefits. It is always a good idea to have a qualified employment attorney draft the agreement. The attorney should ask questions regarding prior grievances, complaints, or inquiries the employee has made during employment. He or she should also ask if the employee is aware of any non-safety concerns regarding the workplace. This provision benefits the employer because if the employee has not complained about safety or non-safety issues or concerns, he or she waives his or her right to file a charge with the government or bring a lawsuit. The basic premise is that if you want the paycheck, you need to forfeit your right to make any claims against the employer in the future if the employer pays you. Last, sometimes an employer simply would rather avoid the bad publicity of a public termination of an employee and would prefer to enter a separation agreement. In this case, an employer and employee may agree that the relationship was mutual and they would prefer to go their separate ways without mentioning any of the details of the employment in the press.
What Happens When an Employee Claims Wrongful Termination in Arizona
If an employee believes that he or she has been wrongfully discharged, the Arizona Division of Equal Employment Services (Arizona DES) can become involved in relation to some claims. An employee can file a complaint alleging wrongful discharge with the Arizona DES and is not required to seek counsel before filing the complaint. However, if the Arizona DES accepts the claim, it becomes completely involved, assuming responsibility for presenting evidence and prosecuting the complaint. In other words, the Arizona DES assumes the role of plaintiff in pursuing the complaint. They also help to; facilitate voluntary settlements between employees and employers; assist in alternative dispute resolution procedures; conduct investigations; hold hearings or issue default determinations as to a claimant’s right to relief; issue compliance review letters; make findings of fact and conclusions of law; make recommendations for administrative and/or judicial relief; and attempt to conciliate disputes.
As an employer, understanding Arizona’s wrongful termination law and what it means when an employee brings a claim alleging wrongful discharge is vital. If an employee brings such a claim against an employer and the claim is not taken seriously by the employer, this attitude can lead to a large damage award at trial or in a settlement. It happens all the time that employers ignore claims, thinking they don’t need to take action, only to discover later that they are now facing a lawsuit that could have been avoided.
Termination and Unemployment Benefits
Termination of employment is often an important factor in determining whether or not an individual will receive unemployment benefits in Arizona. It is necessary to note that the determination of eligibility for benefits is not based solely on whether the individual was caused to leave his place of employment. Under Arizona law, an employee may not be entitled to benefits if he or she was terminated due to a "just cause reason" or was terminated because he or she quit without good cause.
If the employee is not entitled to benefits and appeals the Arizona Department of Economic Security’s decision or finds himself under investigation for unemployment fraud, the matter will be referred to an administrative hearing before an Administrative Law Judge. The hearing will be an opportunity for both parties to present their evidence both in the form of witnesses and documentary evidence. Having an attorney represent you at such a hearing is costly , but may help you ensure your collection of unemployment benefits or avoid a finding of fraud.
The bottom line is that unemployment claims can become heated disputes whereby an employer who terminates employment for what he or she believes is a just cause reason, may find himself challenged when the employee files for unemployment benefits. While the employee will gain the immediate benefit of receiving unemployment compensation, the employer may have to challenge the claim and gather evidence to help ensure a denial of the employee’s claim to unemployment compensation. If an employer fails to inform the Department of Economic Security of the termination, potential reason for termination and challenges the benefits, the employee may be able to collect unemployment benefits and the employer loses its ability to challenge the benefits at any time in the future.