Employee rights when you are terminated cover final pay, continued health insurance, unemployment benefits, your retirement savings, and protection from illegal firing. Several of these rights come with short deadlines, and once those deadlines pass, the rights are gone. Read the section on deadlines first, then work through the rest in the order that matches your situation.
Deadlines to Write Down First
Four clocks start running the day you lose your job. Missing any of them can cost you real money or a real legal claim.
- EEOC discrimination charge: generally 180 days from the termination, extended to 300 days in most states.
- COBRA election: 60 days from the date you receive the election notice.
- ACA Marketplace Special Enrollment Period: 60 days from the date you lose job-based coverage.
- 401(k) indirect rollover: 60 days from receiving a distribution check to redeposit it into another retirement account.
If you might need any of these, act early. Filing an EEOC charge, for example, doesn’t commit you to a lawsuit. It just preserves your ability to bring one later.
Your Final Paycheck
Federal law lets employers pay your final wages on the next regularly scheduled payday.1U.S. Department of Labor. Last Paycheck Many states require faster payment, sometimes on the last day of work. Check your state labor department for the exact rule that applies where you worked.
Your final check must include every hour worked, plus any overtime if you’re non-exempt. Salaried exempt employees who didn’t finish out a full workweek can have that final week’s salary prorated.2U.S. Department of Labor. Fact Sheet 17G – Salary Basis Requirement and the Part 541 Exemptions Under the FLSA
An employer cannot hold your paycheck hostage to force the return of company property. Some deductions are allowed under the Fair Labor Standards Act, such as the cost of unreturned equipment or uniforms, but only if the deduction does not drop your pay below the federal minimum wage of $7.25 per hour for that workweek. Deductions can never eat into overtime pay you already earned, even for damage you caused through negligence.3U.S. Department of Labor. Fact Sheet 16 – Deductions From Wages for Uniforms and Other Facilities Under the FLSA
Unused Vacation and PTO
Federal law does not require a payout of unused vacation or PTO.1U.S. Department of Labor. Last Paycheck Whether you get one depends on state law and your employer’s written policy. Some states treat accrued vacation as wages that must be paid at termination. Others leave the choice to the employer. Read your handbook and offer letter. If either promises a payout, the employer is generally bound by that promise regardless of what state law says.
Keeping Health Insurance
You have two main paths to avoid a coverage gap: COBRA continuation of your employer’s plan, or a new plan through the ACA Marketplace. Compare them both before choosing. COBRA is usually mentioned first in exit paperwork, and many people default to it and overpay.
COBRA
COBRA applies to private-sector employers with 20 or more employees.4U.S. Department of Labor. Continuation of Health Coverage (COBRA) Many states have “mini-COBRA” laws that reach smaller employers. The notice process runs on a schedule: your employer has 30 days to notify the plan administrator, who then has 14 days to send you an election notice.5Office of the Law Revision Counsel. 29 USC 1166 – Notice Requirements When the employer is also the plan administrator, the combined window is 44 days.6Centers for Medicare and Medicaid Services. COBRA Continuation Coverage Questions and Answers Once the election notice arrives, you have 60 days to decide.7U.S. Department of Labor. COBRA Continuation Coverage
Cost is the catch. You pay the full premium yourself, up to 102% of the plan’s total cost (the extra 2% is an administrative fee).4U.S. Department of Labor. Continuation of Health Coverage (COBRA) For a terminated employee, COBRA lasts up to 18 months. Dependents who lose coverage through events like divorce or the death of the covered employee can continue for up to 36 months.6Centers for Medicare and Medicaid Services. COBRA Continuation Coverage Questions and Answers
ACA Marketplace
Losing employer coverage triggers a Special Enrollment Period on the ACA Health Insurance Marketplace, giving you 60 days from the date coverage ends to sign up. If your income has dropped, premium tax credits can make a Marketplace plan far cheaper than COBRA. You may need to submit documentation confirming the loss of your job-based plan.8HealthCare.gov. If You Lose Job-Based Coverage
Unemployment Benefits
Unemployment insurance provides temporary income to workers who lose their jobs through no fault of their own. Each state runs its own program with different amounts, rules, and durations. You’ll need to have earned enough during a base period, usually the first four of the last five completed calendar quarters before your claim.
The reason you were let go matters more than any other single factor. A layoff for lack of work or downsizing almost always qualifies. Being fired for misconduct, meaning a willful violation of employer rules like theft or insubordination, will likely disqualify you. Here is where people miss out: poor performance is not misconduct. If you tried and simply could not meet the standards, most states still allow benefits.
Once approved, you have to actively look for work and keep records the state can verify: activity type, employer name, date, and result. A general “I looked for jobs” won’t survive an audit. If your initial claim is denied, you can appeal and present your case at a hearing. Don’t treat a denial as the end.
Your 401(k) and Vested Balance
Every dollar you contributed to your 401(k) is yours no matter how briefly you worked at the company. Employer matching contributions follow a vesting schedule, and unvested employer money is forfeited when you leave.9Internal Revenue Service. Retirement Topics – Vesting Pull your latest plan statement to see your vested balance before assuming you know the number.
For that vested balance, the best move for most people is a direct rollover into an IRA or a new employer’s plan. A direct rollover transfers the money without any tax withholding.10Internal Revenue Service. 401(k) Resource Guide – Plan Participants – General Distribution Rules If the plan sends a check to you instead, the administrator is required to withhold 20% for federal taxes, and you have 60 days to deposit the full original distribution amount (covering the withheld 20% from other funds) into another retirement account to avoid tax on the whole distribution.11Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
Cashing out triggers regular income tax plus, if you’re under 59½, an additional 10% early withdrawal penalty. One exception is worth knowing: if you leave your job during or after the year you turn 55, the 10% penalty does not apply to distributions from that employer’s 401(k) plan.12Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions This “rule of 55” covers qualified plans like 401(k)s, not IRAs.
If You Think the Firing Was Illegal
Most U.S. employment is at-will, meaning either side can end the relationship for almost any reason. The exceptions are what protect you.
Title VII of the Civil Rights Act prohibits firing someone because of race, color, religion, sex, or national origin.13U.S. Equal Employment Opportunity Commission. Title VII of the Civil Rights Act of 1964 The Age Discrimination in Employment Act covers workers 40 and older. The Americans with Disabilities Act prohibits termination based on disability.14U.S. Department of Justice. Introduction to the Americans with Disabilities Act The Genetic Information Nondiscrimination Act adds genetic information to the protected list. Retaliation is separately prohibited: your employer cannot fire you for filing a discrimination complaint, participating in an investigation, whistleblowing, or requesting a disability accommodation. A written contract or an implied contract from employer practices or handbook language can also override at-will and require “just cause” for firing.
If any of that fits your situation, the deadline is what matters most. You generally have 180 calendar days from the date of the discriminatory action to file a charge with the EEOC. That extends to 300 days if a state or local agency enforces a similar law, which is the case in most states. For age claims, the extension only applies where a state law and state enforcement agency both exist. A local ordinance alone does not extend the deadline.15U.S. Equal Employment Opportunity Commission. Time Limits for Filing a Charge
Filing is not optional. Except for Equal Pay Act claims, you must file an EEOC charge before you can sue for employment discrimination.16U.S. Equal Employment Opportunity Commission. How to File a Charge of Employment Discrimination You can file through the EEOC’s Public Portal online, at an EEOC office, by phone at 1-800-669-4000, or by mail. A charge filed with either the EEOC or a state fair employment practices agency is automatically dual-filed with the other.
If You Were Part of a Mass Layoff
The Worker Adjustment and Retraining Notification (WARN) Act may have entitled you to 60 days’ advance written notice. It applies to employers with 100 or more full-time employees, or 100 or more employees (including part-timers) who work a combined 4,000 hours per week.17eCFR. 20 CFR Part 639 – Worker Adjustment and Retraining Notification It covers plant closings and mass layoffs. A mass layoff at a single site generally means 50 or more employees are affected during a 30-day period (and they make up at least a third of the site’s workforce), or 500 or more employees regardless of the percentage.18U.S. Department of Labor. Employment Law Guide – Notices for Plant Closings and Mass Layoffs
An employer that violates WARN owes each affected employee back pay and benefits for up to 60 days, essentially the pay you would have earned during the notice period you should have received. The employer also faces a civil penalty of up to $500 per day for failing to notify the local government, avoidable if all affected employees are paid within three weeks of the closing.19U.S. Department of Labor. Additional Frequently Asked Questions About WARN Several states have their own WARN laws with lower employee thresholds or longer notice periods. If you were laid off with little or no notice as part of a larger cut, check both the federal and state versions.
Before You Sign a Severance Agreement
No federal law requires severance pay. When it is offered, it almost always comes with a release of claims: you give up your right to sue in exchange for the money. Read the release carefully and know what you’re trading before signing.
Severance agreements commonly include non-disparagement clauses, confidentiality clauses, and sometimes non-compete provisions limiting where you can work next. The FTC attempted a nationwide ban on non-competes, but that rule was blocked by a federal court in 2024 and the FTC dismissed its appeal in 2025.20Federal Trade Commission. Noncompete Rule Non-compete enforceability is governed by state law and varies widely. A handful of states ban them outright, while most others limit them by duration, geography, or the employee’s role.
Severance amounts are often negotiable, especially when the employer suspects the termination could invite legal scrutiny. Once you sign a release, the rights you waived are gone. Having an employment attorney review the document before you sign is usually worth the cost.
Additional Protections If You’re 40 or Older
The Older Workers Benefit Protection Act sets specific requirements when a severance agreement asks you to waive age discrimination claims. The waiver is only valid if the agreement:
- Is written in plain language the average eligible employee can understand.
- Is supported by new consideration, meaning something of value beyond what you’re already owed.
- Advises you in writing to consult an attorney before signing.
- Gives you at least 21 days to consider the offer (or at least 45 days if it’s part of a group layoff or exit incentive program).
- Gives you at least 7 days after signing to revoke, with the agreement not taking effect until the revocation period ends.
An agreement missing any of these produces an unenforceable waiver of your age discrimination rights.21Office of the Law Revision Counsel. 29 USC 626 – Recordkeeping, Investigation, and Enforcement In a group layoff, the employer must also disclose the job titles and ages of everyone selected for the program and everyone in the same job classification who was not selected.22eCFR. 29 CFR Part 1625 – Age Discrimination in Employment Act That disclosure exists so you can evaluate whether the layoff disproportionately targeted older workers.
Taxes on Severance and Other Termination Payments
Severance pay, accrued vacation payouts, and bonuses paid at termination are all supplemental wages for federal tax purposes. For 2026, employers withhold a flat 22% in federal income tax on supplemental wages up to $1 million, and 37% on amounts above $1 million.23Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide
That 22% is a withholding rate, not your final tax bill. Your actual liability depends on your total income for the year. If a large severance stacks on top of a high salary earned earlier in the year, you may owe more at filing time. If you’re unemployed for most of the year and the severance is your main income, some of the withholding may come back as a refund. Plan for the tax before you spend the net check.