The Iowa employee separation process can be complicated, especially if you’re not familiar with Iowa’s employee termination laws. Meeting your employer obligations, however, is the key to mitigating risk.
This employee separation checklist and guide provides a handy overview of Iowa’s final paycheck requirements, separation notices, severance agreements, reporting employee termination, and withdrawing registration to do business in the state.
Iowa Employee Separation Checklist
- Provide final paycheck
- Issue separation notice
- Execute severance agreement
- Report termination
- Withdraw registration to do business
1. Final Paycheck Requirements in Iowa
Iowa state law mandates that employees who separate from their employer must receive their final paycheck on the next scheduled payday. This applies to both terminated and resigned employees, with an additional 30 days allowed for employers to settle any differences between credited and actually earned commissions.
Employees are entitled to all earned wages upon separation. This includes payment for services, earned sick pay, benefits, and expenses under a health benefit plan. However, employers are not obligated to pay out accrued and unused vacation time unless specified by the employee’s contract or company policy.
The final paycheck must be provided at the employee’s regular place of employment or another mutually agreed-upon location. Employers who fail to pay wages may face penalties, including the payment of unpaid wages, damages, court costs, and attorney’s fees if legal action is required to recover the wages.
2. Firing Employees in Iowa
Firing employees in Iowa is relatively straightforward, since Iowa is an at-will employment state. However, there are two major exceptions.
First, Iowa employers are required to notify all separated employees of the availability of unemployment compensation. This notice should be provided at the time of separation. The Iowa Department of Workforce Development has a sample notice for employers to use. If your organization provides a group health insurance plan and has fewer than 20 employees, you also must notify separated employees of their right to continue coverage under Iowa’s state-level COBRA law. This notice must be provided within 10 days of separation.
Second, certain employers have extra obligations under the Iowa WARN Act. Affected employers must provide at least 30 days’ notice before a mass layoff or plant closing that will affect 25 or more employees. This notice requirement applies to workers who may reasonably expect to lose their jobs due to these events. Employers should consider both in-state and out-of-state employees when determining whether they must provide notice.
Certain exceptions to the 30-day notice requirement include circumstances such as natural disasters, unforeseen business events, or when an employer is actively seeking capital that could prevent the layoff or closing. If these conditions apply, employers must still provide notice as soon as reasonably possible and include explanations for the shortened notice period. Notices must be delivered to affected employees, their representatives, and the Iowa Department of Workforce Development.
3. Severance Agreements in Iowa
If your severance agreement includes claims releases, you must explicitly list the claims the employee is releasing under federal and state law. In Iowa, employees may release claims under the Iowa Civil Rights Act, Iowa’s leave laws, and Iowa’s minimum wage and overtime laws. Best practices dictate that you specify that they are only waiving claims arising prior to the due date, and not after.
Employers should always review relevant federal law when separating from employees—particularly the recent NLRB rulings and guidance, which restrict the inclusion of non-disparagement and confidentiality provisions in severance agreements.
4. Reporting Employee Termination in Iowa
When you’re separating from an employee with an Income Withholding for Support Order (“IWO”), report the employee’s termination to the child support agency, court, or attorney that issued the IWO promptly. Employers may register for online reporting with the Federal Office of Child Support Enforcement here.
Alternatively, report an employee’s termination by completing the Notification of Employment Termination or Income Status section of the IWO. Then fax or mail it to the child support agency that issued it. Prepare 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 Iowa
If your organization stops conducting business in Iowa, including when it has terminated its last employee in the state, you should formally withdraw its registration. This process requires submitting the appropriate form to the Secretary of State, and the form varies depending on the company’s legal structure. For-Profit Corporations must file this Statement of Withdrawal, while Non-Profit Corporations must file this Application for Certificate of Withdrawal. Limited Liability Companies (LLCs) should file this Statement of Withdrawal.
Stay Compliant with Iowa Employee Separation Requirements
Staying current with Iowa Employee Separation Agreement requirements helps employers confirm regulatory compliance and respect employee rights while mitigating risk.
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