Every business owner will face employee departures—some voluntary, some not. The way you handle them determines whether you face a clean transition or an expensive legal problem.
Minnesota imposes specific obligations on employers when an employee leaves. Missing even one can result in statutory penalties, regulatory complaints, or litigation. This checklist consolidates everything a Minnesota employer needs to address when an employee resigns, is terminated, or is laid off.
Before the Departure: Preparation
Good departures start before the employee’s last day. Whether the separation is voluntary or involuntary, these steps apply.
Document the Reason
Minnesota law (Minn. Stat. § 181.933) requires employers to provide a truthful written reason for termination if the employee requests one in writing within 15 working days of separation. The employer must respond within 10 working days of receiving the request.
This means you should document the reason clearly before the termination occurs—not after. A vague or inconsistent explanation creates risk in unemployment hearings, discrimination claims, and wrongful termination lawsuits.
For resignations: Obtain the resignation in writing. If the employee gives verbal notice, follow up with a confirming email. Document the stated reason and the effective date.
For terminations: Prepare a written summary of the reason for termination. Review the employee’s personnel file, performance reviews, and any progressive discipline documentation. Identify any potential claims the employee might raise (discrimination, retaliation, whistleblower) and assess risk before proceeding.
Review the Employee’s Agreements
Before the last day, pull and review:
- Employment agreement — Does it contain notice provisions, severance terms, or post-employment restrictions?
- Non-solicitation or nondisclosure agreements — What obligations survive termination?
- Commission or bonus agreements — What is owed? What forfeiture provisions apply?
- Equity or deferred compensation agreements — Are there vesting, buyback, or forfeiture triggers?
- Intellectual property assignment agreements — Confirm all IP created during employment has been assigned.
Plan the Logistics
For involuntary terminations:
- Choose the timing and location carefully. A private setting, during business hours, with a witness present is standard practice.
- Have the final paycheck ready or know exactly when it will be delivered (within 24 hours of demand under Minn. Stat. § 181.13).
- Prepare a list of company property to collect.
- Coordinate with IT to manage system access changes.
Day of Departure: The Checklist
1. Final Pay
This is the highest-risk item on the list. Minnesota imposes automatic penalties for late final paychecks.
If the employee is terminated: Final wages are due immediately upon demand. Have the check ready at the time of discharge, or within 24 hours of a written demand. The penalty for late payment is one day’s average daily earnings per day of delay, up to 15 days.
If the employee resigns: Final wages are due on the first regularly scheduled payday that falls more than five calendar days after the last day—but no later than 20 calendar days after separation.
The final paycheck must include:
- All earned wages through the last day
- Overtime pay
- Earned commissions
- Accrued vacation or PTO (if your policy treats it as earned)
- Any other earned compensation
Do not deduct for unreturned property, damages, or training costs without legal review. Minnesota restricts what employers may deduct from wages.
For a detailed breakdown of final pay timing, penalties, and direct deposit rules, see [Minnesota Final Paycheck Rules: What Employers Must Know].
2. Benefits Continuation Notice
Health insurance (COBRA/Minnesota continuation):
- For employers with 20 or more employees, federal COBRA requires written notice of the right to continue health coverage. The plan administrator must provide notice within 44 days of the qualifying event.
- For employers with 2-19 employees, Minnesota’s state continuation law applies. The employer must provide notice within 14 days of the qualifying event.
- Under Minnesota law, the employer may charge up to 100% of the premium cost (federal COBRA allows up to 102%).
- Coverage may continue for up to 18 months.
Other benefits:
- Life insurance. Notify the employee of any conversion rights.
- Retirement plans (401(k), SIMPLE IRA). Provide required distribution and rollover information.
- FSA/HSA. Advise on remaining balances and deadlines.
3. Company Property
Collect all company property before or on the last day:
- Laptop, phone, tablet, and other devices
- Keys, access cards, and badges
- Credit cards
- Files, documents, and physical materials
- Uniforms or branded materials
- Client lists or proprietary documents (physical copies)
Important: Do not withhold the final paycheck as leverage for property return. Minnesota law does not allow this. Pursue unreturned property through separate channels—demand letters, deposit deductions (if pre-authorized), or civil claims.
4. System and Facility Access
Coordinate with IT to revoke or modify access on the employee’s last day:
- Email accounts. Disable the employee’s access. Set up forwarding or an auto-reply as appropriate for business continuity. Do not allow a former employee to retain access to company email—this creates trade secret, confidentiality, and data security risks.
- Software and cloud services. Revoke access to CRM, file storage, accounting systems, project management tools, and any SaaS platforms.
- VPN and remote access. Disable immediately.
- Physical access. Deactivate badge access, change alarm codes, and collect keys.
- Voicemail. Update the greeting and forwarding.
Why this matters beyond security: Under the federal Computer Fraud and Abuse Act (CFAA), an employer may have a cause of action if a former employee accesses company systems without authorization after separation. But the key word is without authorization—if you never revoke access, the legal argument is weaker. Revoke access promptly and document when you did so.
5. Personnel File
Under Minn. Stat. § 181.961, employees and former employees have the right to review and obtain copies of their personnel records.
- Current employees may review their file once every six months.
- Former employees may review once per year after separation, for as long as the file is maintained.
- The employer must comply within 7 working days (if the file is in Minnesota) or 14 working days (if stored out of state).
- Copies must be provided free of charge to former employees.
Ensure the personnel file is complete and organized before the employee’s last day. Remove any documents that should not be in a personnel file (such as medical records, which should be stored separately under the ADA).
6. Unemployment Insurance
When an employee separates, the employer will typically receive a notice from the Minnesota Unemployment Insurance Program requesting information about the separation.
- Respond promptly and accurately. Failure to respond may result in the claim being paid by default, which increases your unemployment tax rate.
- Provide documentation. If the employee was terminated for misconduct, provide the documentation supporting that determination.
- Understand the standard. In Minnesota, employees terminated for “employment misconduct” (a deliberate violation of employer rules or negligent conduct) are disqualified from unemployment benefits. Employees terminated for “poor performance” that does not rise to misconduct may still qualify.
7. Reason for Termination Notice
If the terminated employee requests a written reason for termination:
- The request must come within 15 working days of termination.
- The employer must respond within 10 working days of receiving the request.
- The reason must be truthful.
- Keep a copy of both the request and your response.
This is not optional. Failure to provide the reason is a separate violation of Minnesota law.
Post-Departure: Follow-Up
Notify Relevant Parties
Depending on the employee’s role, notify:
- Clients or customers who worked directly with the employee
- Vendors or partners who had a primary contact relationship
- Internal teams who need to know about reporting or workflow changes
- Insurance carriers, if the employee was a named insured or authorized driver
Enforce Post-Employment Obligations
If the employee signed non-solicitation, nondisclosure, or other post-employment agreements, take these steps within the first few weeks:
- Send a reminder letter. A professional letter reminding the departing employee of their post-employment obligations puts them on notice and creates a record. This is especially important if the employee is going to a competitor.
- Monitor for violations. Watch for solicitation of clients, use of confidential information, or social media posts that suggest misuse of trade secrets.
- Act quickly if you discover a violation. Delay in enforcing post-employment restrictions can weaken your legal position.
Note: Minnesota banned most post-employment non-compete agreements effective July 1, 2023 (Minn. Stat. § 181.988). Non-solicitation and nondisclosure agreements remain enforceable. Non-competes signed before the ban may still be enforceable depending on the circumstances.
For a detailed discussion of post-employment enforcement, see [Post-Employment Obligations: Non-Competes, Email Access, and Trade Secrets].
Consider a Severance Agreement
For many separations—particularly involuntary ones—offering a severance agreement makes strategic sense. A well-structured severance agreement provides:
- A release of claims from the employee
- Confidentiality regarding the terms of separation
- Non-disparagement provisions (with appropriate limitations)
- Clarity on post-employment obligations
In exchange, the employee receives compensation beyond what is legally required—typically a lump sum or continuation of pay for a defined period.
Severance agreements must meet specific legal requirements to be enforceable, particularly for employees over 40 (the Older Workers Benefit Protection Act imposes mandatory review and revocation periods). Minnesota law adds its own requirements, including a 15-day rescission period under the Minnesota Human Rights Act.
For a detailed guide to structuring enforceable severance terms, see [Severance Agreements in Minnesota: How to Structure Enforceable Terms].
Retain Records
Minnesota law requires employers to retain payroll records for at least three years. Best practice is longer:
- Personnel files: Retain for at least 7 years after separation (some employment discrimination claims have extended filing periods).
- Payroll records: Retain for at least 4 years (IRS requirement) or longer.
- Benefits records: Retain for at least 6 years after the plan year (ERISA requirement).
- I-9 forms: Retain for 3 years after hire or 1 year after termination, whichever is later.
The Resignation-Specific Checklist
When an employee resigns voluntarily, several items on the main checklist are simplified, but a few unique considerations arise:
Notice period. Minnesota is an at-will employment state. Employees are not legally required to give two weeks’ notice (unless their employment agreement says otherwise). If an employee gives inadequate notice, you may accept the resignation effective immediately—but the final pay deadline changes depending on whether you treat the departure as a resignation or a termination.
Counter-offers. If you want to retain the employee, move quickly. But also assess whether the underlying reasons for leaving will be resolved by a raise or title change.
Knowledge transfer. Use the notice period to document processes, transfer client relationships, and train the replacement or interim coverage.
Exit interview. An exit interview can reveal workplace issues you would not otherwise hear about. Keep the conversation professional and documented.
When to Involve an Attorney
Most routine employee departures do not require legal counsel. But these situations do:
- The employee has raised or may raise claims of discrimination, retaliation, or harassment
- You are terminating an employee who recently filed a workers’ compensation claim, took FMLA leave, or made a complaint to a regulatory agency
- The separation involves a senior executive with complex compensation or equity arrangements
- You are conducting a reduction in force affecting multiple employees
- You want to offer a severance agreement and need enforceable terms
- The employee has access to trade secrets or sensitive client information and is going to a competitor
- The employee has threatened litigation
A proactive legal review costs far less than defending a post-termination lawsuit.
For guidance on employee departures specific to your company, contact Aaron Hall, attorney for business owners, at aaronhall.com or 612-466-0040.