New Law Requires Notice of Reason for Termination

July 6, 2022

By: Colin A. Walker

Senate Bill 22-234, which amended the Colorado Employment Security Act, passed by the Colorado legislature and signed into law by the Governor on May 25, 2022, requires Colorado employers to provide a written notice to an employee regarding unemployment benefits upon separation from employment. The written notice must include:

  • The employer’s name and address;
  • The employee’s name and address;
  • The employee’s identification number or the laws 4 digits of the social security number;
  • The employee’s start date;
  • The last day worked;
  • The employee’s year-to-date earnings; 
  • Wages for the last week worked; and
  • The reason for separation. 

The purpose of the law is to ensure that employees are aware of their right to apply for unemployment benefits. However, the ramifications could be much more significant. 

Many employers have a practice of issuing a termination letter to employees upon termination, which among other things, explains the reasons for the termination. All too often, this backfires. In an effort to spare the employee’s feelings or avoid uncomfortable conversations, employers sometimes “soft pedal” the reasons for the termination. If litigation ensues, a skilled plaintiff’s employment attorney can use such a letter to challenge the employer’s reasoning for terminating the employee or undermine the employer’s credibility. A classic case of this is when an employer terminates an employee for performance problems, but, instead of saying so in the termination letter, states that the position is being eliminated. If the employer hires a replacement shortly thereafter, the termination letter can be used to show that the employer lied or had a pretext for termination, such as discrimination. For these reasons, many employment attorneys do not recommend termination letters. 

Now, however, this new law requires the employer to provide the terminated employee with a written notice which includes the reason for termination. Therefore, Colorado employers will confront this issue in each and every separation. It is likely that notices required by this law will become important evidence in future employment litigation, particularly discrimination cases. 

Employers should put careful thought into the reasons for termination and how to explain it in the notice. Of course, prudent employers will put careful thought into the reasons for termination and the messaging in all cases. However, the new law’s requirements up the ante. Employers should be careful to include all reasons for the termination, however painful or awkward this may be. Drafting the notices will be critical and employers should work with competent employment counsel to prepare notices for difficult terminations.