Every business owner will face employee departures. Some are smooth. Some turn into lawsuits. The difference almost always comes down to how you handle the last few days.
Minnesota imposes specific obligations on employers when an employee leaves, and the penalties for missing them are automatic—not discretionary. This checklist covers what you need to do before, during, and after an employee’s departure, whether it’s a resignation, termination, or layoff.
Before the Departure: Preparation
Good departures start before the employee’s last day. I’ve handled separations where the entire legal problem traced back to something the employer said—or failed to document—in the 48 hours before the termination meeting.
Document the Reason
Under Minn. Stat. § 181.933, if a terminated employee requests a written reason for termination within 15 working days of separation, you must respond within 10 working days. The reason must be truthful.
This means you need to nail down the reason before the termination—not after. A vague or shifting explanation will haunt you in the unemployment hearing, and it becomes exhibit A in any discrimination or wrongful termination claim.
For resignations: Get it in writing. If the employee gives verbal notice, follow up immediately with a confirming email. Document the stated reason and the effective date.
For terminations: Prepare a written summary of the reason. Review the personnel file, performance reviews, and progressive discipline documentation. Before you proceed, identify any potential claims the employee might raise—discrimination, retaliation, whistleblower—and honestly assess your risk.
Review the Employee’s Agreements
Before the last day, pull and review:
- Employment agreement—notice provisions, severance terms, post-employment restrictions
- Non-solicitation or nondisclosure agreements—what obligations survive termination?
- Commission or bonus agreements—what is owed, and what forfeiture provisions apply?
- Equity or deferred compensation agreements—vesting, buyback, or forfeiture triggers
- Intellectual property assignment agreements—confirm all IP created during employment has been assigned
The most common mistake I see employers make is not reviewing these agreements until after the employee has already left. By then you’ve lost leverage, and you may have already missed a contractual deadline.
Plan the Logistics
For involuntary terminations, choose the timing and location carefully. A private setting, during business hours, with a witness present is standard. 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, and coordinate with IT on system access.
Day of Departure: The Checklist
1. Final Pay
This is the highest-risk item on the list. In my experience, the final pay deadline catches more employers off guard than anything else on this checklist. Minnesota imposes automatic penalties—one day’s average daily earnings per day of delay, up to 15 days—and there’s no grace period.
Terminations: Final wages are due immediately upon demand. Have the check ready at discharge, or within 24 hours of a written demand.
Resignations: 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, earned commissions, accrued vacation or PTO (if your policy treats it as earned), and 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, and unauthorized deductions create a separate cause of action.
2. Benefits Continuation Notice
Health insurance:
- Employers with 20+ employees: federal COBRA requires written notice of continuation rights. The plan administrator must provide notice within 44 days of the qualifying event.
- Employers with 2–19 employees: Minnesota’s state continuation law applies, with notice required within 14 days.
- Minnesota allows charging up to 100% of premium cost (federal COBRA allows 102%). Coverage may continue for up to 18 months.
Also notify the employee of life insurance conversion rights, provide 401(k)/SIMPLE IRA distribution and rollover information, and advise on FSA/HSA balances and deadlines.
3. Company Property
Collect all company property before or on the last day: laptops, phones, keys, access cards, credit cards, files, uniforms, and any physical copies of client lists or proprietary documents.
Do not withhold the final paycheck as leverage for property return. Minnesota law doesn’t 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 access on the employee’s last day:
- Email—disable the employee’s access and set up forwarding or an auto-reply. 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 CRM, file storage, accounting, and SaaS access
- VPN and remote access—disable immediately
- Physical access—deactivate badge access, change alarm codes, collect keys
This matters beyond security. Under the federal Computer Fraud and Abuse Act (CFAA), you may have a cause of action if a former employee accesses company systems without authorization. But the key word is without authorization—if you never revoke access, that argument weakens considerably. Revoke promptly and document when you did it.
5. Personnel File
Under Minn. Stat. § 181.961, former employees may review their personnel records once per year after separation, for as long as the file is maintained. You must comply within 7 working days (14 if stored out of state), and copies must be provided free of charge.
Before the last day, make sure the file is complete and organized. Remove any documents that don’t belong—particularly medical records, which must be stored separately under the ADA.
6. Unemployment Insurance
You’ll 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.
If the employee was terminated for misconduct, provide supporting documentation. Keep in mind the standard: “employment misconduct” (a deliberate violation of employer rules or negligent conduct) disqualifies an employee from benefits. “Poor performance” that doesn’t rise to misconduct usually doesn’t.
7. Reason for Termination Notice
If a terminated employee requests a written reason: the request must come within 15 working days of termination, and you must respond within 10 working days. The reason must be truthful. Keep copies 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, you may need to notify clients, vendors, internal teams, and insurance carriers (if the employee was a named insured or authorized driver). Don’t let clients find out about a departure by getting a bounced email.
Enforce Post-Employment Obligations
If the employee signed non-solicitation, nondisclosure, or other post-employment agreements:
- Send a reminder letter within the first week. A professional letter putting the departing employee on notice of their obligations creates a record and sets the tone—especially if they’re going to a competitor.
- Monitor for violations. Watch for client solicitation, use of confidential information, or social media activity suggesting misuse of trade secrets.
- Act quickly if you discover a violation. Delay weakens 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.
Consider a Severance Agreement
For involuntary separations, a severance agreement is often your best risk-management tool. In exchange for compensation beyond what’s legally required, you get a release of claims, confidentiality, non-disparagement, and clarity on post-employment obligations.
Severance agreements must meet specific legal requirements to be enforceable. For employees over 40, the Older Workers Benefit Protection Act imposes mandatory review and revocation periods. Minnesota adds a 15-day rescission period under the Minnesota Human Rights Act. Get these wrong and the release is worthless.
Retain Records
Record retention after a separation is governed by overlapping federal and state requirements. At minimum: payroll records for 4 years (IRS), benefits records for 6 years (ERISA), and I-9 forms for 3 years after hire or 1 year after termination, whichever is later. I recommend retaining personnel files for at least 7 years after separation, given extended filing periods for some employment discrimination claims. Work with your attorney and HR to establish a retention schedule that covers your specific obligations.
A Note on Resignations
When an employee resigns voluntarily, most of the checklist above still applies—but a few points are worth highlighting. Minnesota is an at-will state, so employees aren’t legally required to give two weeks’ notice unless their agreement says otherwise. If you accept a resignation effective immediately, be aware the final pay deadline may shift depending on whether you treat it as a resignation or a termination. Use the notice period for knowledge transfer: documenting processes, transitioning client relationships, and training interim coverage.
When to Involve an Attorney
Most routine departures don’t require legal counsel. But I tell business owners this: by the time you think you might need a lawyer, you probably needed one two weeks ago. Get proactive legal review when:
- The employee has raised or may raise claims of discrimination, retaliation, or harassment
- You’re terminating someone who recently filed a workers’ compensation claim, took FMLA leave, or complained to a regulatory agency
- The separation involves a senior executive with complex compensation or equity
- You’re conducting a reduction in force affecting multiple employees
- You want an enforceable severance agreement
- The employee has trade secrets or sensitive client information and is going to a competitor
- The employee has threatened litigation
A proactive review costs a fraction of what you’ll spend defending a post-termination lawsuit.
For guidance on employee departures specific to your company, contact me at aaronhall.com or 612-466-0040.
Frequently Asked Questions
How quickly must Minnesota employers pay a terminated employee?
Under Minn. Stat. § 181.13, if a terminated employee demands payment, the employer must pay all wages earned within 24 hours. If the employee does not make a demand, wages are due on the next regular payday. Penalties for late payment can include the employee’s full daily wage for each day of delay, up to 15 days.
What documents should employers prepare before an employee’s last day?
Employers should prepare: (1) final paycheck calculations including accrued PTO, (2) COBRA continuation notice, (3) separation agreement if applicable, (4) IT access revocation checklist, (5) company property return form, and (6) written confirmation of separation terms. Having these ready prevents delays that can trigger statutory penalties.
Can a Minnesota employer withhold final pay for unreturned company property?
No. Minnesota law requires employers to pay all earned wages regardless of whether company property has been returned. Withholding final pay for unreturned equipment violates Minn. Stat. § 181.13 and exposes the employer to penalty wages. The employer must pursue unreturned property through separate legal channels.
Is an employer required to give a reason for termination in Minnesota?
Not automatically, but if a terminated employee requests a written reason within 15 working days of separation, the employer must respond truthfully within 10 working days under Minn. Stat. § 181.933. The reason given can be used as evidence in subsequent legal proceedings.