The Arizona employee separation process isn’t just a matter of firing employees. There are state-specific required procedures that must be followed in order to mitigate risk and ensure legal compliance.
The following employee separation checklist and guide will help you understand the main components of the employee separation process, starting with final paycheck requirements and separation notices and severance agreements. It also includes, if necessary, reporting employee termination and withdrawing registration to do business in the state.
Arizona Employee Separation Checklist
- Provide final paycheck
- Issue separation notice
- Execute severance agreement
- Report termination
- Withdraw registration to do business
1. Final Paycheck Requirements in Arizona
Arizona state law outlines employee rights after termination. If an employee is terminated, they must be paid within seven working days or by the end of the next regular pay period—whichever is earlier. Employees who resign must receive their final paycheck on the next regular payday for the pay period in which they separated. The final paycheck must include all wages due to the employee.
Employers are not obliged to pay out unused vacation time unless the employee has a reasonable expectation to receive it. This is usually established by company policy or practice. Final wages should be paid in the usual manner, but if the employee requests, they must be sent by mail. Employers who fail to comply with these wage payment requirements may face a $300 fine as a petty offense.
2. Firing Employees in Arizona
Arizona is an at-will employment state, which means that the employer or employee can end employment for any legal reason, at any time. In Arizona, a separated employee must receive a printed statement explaining how to file for unemployment benefits.
If the employer offers a group health insurance plan and has fewer than 20 employees, they are required to notify the separated employee of their right to continue coverage under Arizona’s state-level COBRA law within 30 days of separation.
This notice is typically provided by the plan administrator. It must inform the employee and any qualified dependents of their right to continue coverage at the full cost. This includes both the employer’s and employee’s contributions, plus an administrative fee not exceeding five percent of the premium.
It must also outline the cost of coverage separately for the employee and dependents, the process and deadline for electing continuation coverage, and the payment schedule. The notice should clearly state that failure to make timely payments will result in the loss of continuation coverage.
3. Severance Agreements in Arizona
When employers are finalizing severance agreements with employees, they must clearly outline the specific claims being waived under both federal and state laws. In Arizona, this includes claims related to minimum wage and overtime, the Arizona Employment Protection Act, the Arizona Civil Rights Act, and the Arizona Equal Pay Act.
Employers must ensure that the severance agreement only waives claims that arose before the agreement’s effective date, and does not extend to claims that may arise afterward.
Employers should also review relevant federal regulations. Notably, recent rulings from the National Labor Relations Board (NLRB) and guidance from its General Counsel have imposed restrictions on non-disparagement and confidentiality clauses in severance agreements.
4. Reporting Employee Termination in Arizona
When an employee subject to an Income Withholding for Support Order (IWO) is terminated, you must promptly report their termination to the child support agency, court, or attorney that issued the IWO. You can register for online reporting with the Federal Office of Child Support Enforcement, or report it physically by completing the Notification of Employment Termination or Income Status section of the IWO and faxing or mailing it to the issuing child support agency.
When making the report, be prepared to provide the following information:
- Employee Name
- Employee Case Identifier
- Last Known Home Address
- New Employer Address (if known)
- Date of Employee Separation
5. Withdraw Registration to do Business in Arizona
When an organization ceases to do business in Arizona—such as when it no longer has any employees in the state—it must formally withdraw its registration. This can be done by submitting the appropriate form(s) to the Secretary of State. The forms required vary based on the organization’s legal structure.
For both For-Profit and Nonprofit Corporations, the organization needs to file the Application for Withdrawal and provide a Clearance Certificate from the Arizona Department of Revenue. This verifies that all state taxes have been settled. The Clearance Certificate can be requested through the Department of Revenue’s website. For Limited Liability Companies (LLCs), the necessary form is the Statement of Withdrawal.
Stay Compliant with Arizona Employee Separation Requirements
Understanding Arizona’s employee termination laws is the key to ensuring you’ve carried out your employer obligations and recognized employee rights.
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