Understanding Tennessee’s employee separation process is the best way to mitigate risk and comply with your employer obligations. State-specific employment laws can differ dramatically across the nation, so it’s important to know exactly which employee termination laws apply to your organization. This employee separation checklist and guide is an easy way to become familiar with Tennessee’s final paycheck requirements, separation notices, severance agreements, reporting employee termination, and withdrawing registration to do business in the state.
Tennessee Employee Separation Checklist
- Provide final paycheck
- Issue separation notice
- Execute severance agreement
- Report termination
- Withdraw registration to do business
1. Final Paycheck Requirements in Tennessee
Under Tennessee state law, separated employees must be paid all earned wages by the next scheduled payday, or within 21 days following their termination or resignation—whichever comes first. However, employers are not obligated to pay out accrued and unused vacation time, unless it is specified in an employee contract or company policy.
Although the law does not dictate how final wages should be delivered, using regular pay channels is considered best practice. Employers who fail to pay wages on time may face penalties, including being charged with a Class B misdemeanor and fines up to $500 per offense. They may also be liable for up to $1,000 for willful violations.
2. Firing Employees in Tennessee
Tennessee is an at-will employment state, which means firing employees is permissible for any legal reason. The state sets forth one general notice requirement: all employees in Tennessee who separate from employment must be provided a Form LB-0489 – Separation Notice within one day of separation. If the employee has been employed for less than a week or will be recalled within a week, however, the employer is excepted from this rule.
Some employers may have further obligations under the Tennessee WARN Act. The Act requires specific employers—those with 50 to 99 full-time employees at a single workplace—to provide notice to affected employees in the event of a significant reduction in operations. A “reduction in operations” includes closures, modernization, relocation, or policy changes. The reduction must lead to a permanent or indefinite reduction of 50 or more employees within a three-month period.
Notice must be given to affected employees and the Tennessee Commissioner of Labor and Workforce Development, though the law does not specify the timing or content of these notices, nor does it require advance notice. Notably, employers are instructed to notify the Commissioner via telephone. There are no exceptions for avoiding WARN notice in Tennessee, unlike in other states, and certain events like labor disputes, construction site closures, or seasonal factors do not trigger the requirement to deliver WARN notices.
3. Severance Agreements in Tennessee
If you plan to execute a severance agreement with Tennessee employees, you must explicitly list the claims being released under both federal and state law. In Tennessee, releasable state law claims include those under the Tennessee Human Rights Act, Tennessee Disability Act, Tennessee Pregnant Workers Fairness Act, Tennessee Drug-Free Workplace Act, Tennessee Equal Pay Act, Tennessee Public Participation Act, Tennessee Wage Regulation Act, and Tennessee’s leave laws.
Employers should also ensure that non-disparagement clauses in severance agreements do not restrict employees from discussing conduct that constitutes sexual harassment or sexual assault under federal, state, or tribal law. Ensure that any release of claims only applies to claims that arose before the agreement’s effective date.
Additionally, employers must consider relevant federal laws. For example, note the NLRB’s recent decision and guidance, which limits the use of non-disparagement and confidentiality provisions in severance agreements.
4. Reporting Employee Termination in Tennessee
If your separated employee has an Income Withholding for Support Order (“IWO”), your organization report the employee’s termination to the child support agency, court, or attorney that issued the IWO as soon as possible. You may register for online reporting with the Federal Office of Child Support Enforcement here.
Organizations also opt to 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. You will need 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 Tennessee
If your company ceases business operations in Tennessee—which often happens when separating from the last in-state employee—you can formally withdraw your business registration. The type of form you’ll need to submit depends on what kind of legal entity your organization is. For-Profit Corporations must file this Application for Certificate of Withdrawal.
Non-Profit Corporations need to submit this Application for Certificate of Withdrawal, and finally, Limited Liability Companies (LLCs) must file an Application for Cancellation.
Stay Compliant with Tennessee Employee Separation Requirements
Understanding Tennessee Employee Separation Agreement laws helps employers ensure regulatory compliance by recognizing state-specific employee rights.
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Looking for employee separation laws for a different state? Our interactive map makes it easy to find all employee termination requirements by state.
