Checklist · Employment · Separation

Illinois Employee Separation Checklist for Employers: Final Pay, Notices, Covenants, and Releases

The day an employee leaves starts several legal clocks at once. This checklist puts the Illinois and federal deadlines for final pay, notices, records, covenants, and separation agreements in working order.

By Lincoln Square Law · 12-minute read

🖨 Print this checklist

A resignation letter arrives on Monday, or a manager decides on Thursday that Friday will be someone’s last day. From that point the employer owes a final paycheck by a fixed date, an unemployment insurance form within days, and health plan notices on their own schedule. A release, a confidentiality promise, or a noncompete adds its own statutory review period.

Use this list for a resignation, a discharge, or a layoff in Illinois, including Chicago. Items marked Recommendation go beyond what a statute requires. Dollar thresholds and dates are stated as of this writing.

1. Before the decision is communicated

• Recommendation: Write down the reason for the separation, the decision-maker, and the documents relied on. Use that reason in every later communication.
• Recommendation: Compare how the company handled other employees with similar conduct or performance, and explain any difference in the file.
• Recommendation: Check the timing against any recent complaint, injury claim, leave request, or accommodation request. See our white paper on building the decision record before acting.

2. Group layoffs: federal and Illinois WARN

• The federal WARN Act applies at 100 or more employees, not counting part-time employees, or 100 or more employees who together work at least 4,000 hours per week. The Illinois WARN Act uses the same tests at 75 (29 U.S.C. 2101(a)(1), 820 ILCS 65/5).
• Test the event at the single site of employment over any 30-day period. A plant closing is a shutdown causing an employment loss for 50 or more employees. A federal mass layoff is a loss for at least 33 percent of the employees and at least 50 employees, or for at least 500. The Illinois figures are 33 percent and at least 25 employees, or at least 250. Part-time employees are not counted (29 U.S.C. 2101(a)(2), (a)(3), 820 ILCS 65/5).
• Add up smaller rounds. Employment losses at one site within any 90-day period are combined unless the employer shows separate and distinct actions and causes (29 U.S.C. 2102(d), 820 ILCS 65/25).
• If either law applies, give 60 days’ written notice to affected employees, their representatives, and the required government recipients, which in Illinois include the Department of Commerce and Economic Opportunity. The exceptions that shorten the period are narrow (29 U.S.C. 2102(a), (b), 820 ILCS 65/10, 820 ILCS 65/15).

3. Final compensation and deductions

• Pay final compensation in full at the time of separation if possible, and in no case later than the next regularly scheduled payday. The rule is the same for a resignation and a discharge (820 ILCS 115/5).
• Include wages, salaries, earned commissions, earned bonuses, the monetary equivalent of earned vacation and earned holidays, and any other compensation owed under the employment contract or agreement (820 ILCS 115/2).
• Pay all earned, unused vacation at the final rate of pay. Unless a collective bargaining agreement provides otherwise, no contract or policy may forfeit earned vacation at separation (820 ILCS 115/5, 56 Ill. Adm. Code 300.520(h)).
• Calculate vacation as the Department of Labor rule does. Vacation earned by length of service accrues pro rata as the employee works, a paid time off policy is treated as earned vacation, and handbooks, oral promises, and uniform practice can create the duty to pay. Keep records of the days earned and taken (56 Ill. Adm. Code 300.520(a), (b), (f), (g)).
• Sort paid leave by bank. The Paid Leave for All Workers Act does not itself require payout of unused leave at separation, but leave credited to a paid time off bank or vacation account is paid to the same extent as vacation. Chicago’s ordinance has its own rule: unused, accrued Paid Leave is paid as part of final compensation, except that Small Employers as the ordinance defines them need not pay it out, and unused Paid Sick Leave is not paid out unless a collective bargaining agreement provides otherwise (820 ILCS 192/15, Chicago Mun. Code 6-130-020).
• Take no deduction unless it is required by law, to the benefit of the employee, in response to a valid wage assignment or wage deduction order, or made with the employee’s express written consent given freely at the time of the deduction. Unreturned equipment does not fit the first three (820 ILCS 115/9).
• If the amount is disputed, pay on time and without condition every part the company concedes is due. Accepting the check does not release the employee’s claim to the balance (820 ILCS 115/9).
• Late final compensation carries damages of 5 percent of the underpayment for each month it remains unpaid and, in a civil action, costs and reasonable attorney’s fees (820 ILCS 115/14).

4. Notices owed at separation

• Give each worker separated for an expected 7 or more days the Illinois Department of Employment Security form “What Every Worker Should Know About Unemployment Insurance.” Deliver it at separation or, if that is impracticable, mail it to the last known address within 5 days after the separation date (56 Ill. Adm. Code 2720.100).
• Determine whether COBRA applies. It does not apply for a calendar year if all employers maintaining the plan normally employed fewer than 20 employees on a typical business day during the preceding calendar year (29 U.S.C. 1161(b)).
• If COBRA applies, notify the plan administrator within 30 days of the termination or reduction in hours. The administrator then has 14 days to send the election notice. An employer that is also the plan administrator has 44 days (29 U.S.C. 1166(a)(2), 1166(c), 29 C.F.R. 2590.606-4(b)).
• For an insured group policy, check Illinois continuation coverage. An employee continuously insured for the prior 3 months may continue coverage for up to 12 months. Written notice goes out within 10 days after the termination or reduction in hours, and the employee elects within 30 days after the later of the termination or the notice, and never more than 60 days after termination (215 ILCS 5/367e). Confirm with the carrier who sends the notice, and keep dated proof of every notice in this section.

5. Personnel records and references

• The Personnel Record Review Act covers a former employee who has terminated service within the preceding year (820 ILCS 40/1).
• Answer a written request within 7 working days after receipt, or within 7 more calendar days if the company can reasonably show it cannot meet that deadline. Any fee is limited to the actual cost of duplication (820 ILCS 40/2).
• Before giving a third party a disciplinary report or letter of reprimand, send the employee written notice by first-class mail on or before the day of disclosure and remove disciplinary records more than 4 years old. Limited exceptions apply (820 ILCS 40/7, 820 ILCS 40/8).

6. Noncompetes and nonsolicits under the Freedom to Work Act

• A noncompete is void unless the employee’s actual or expected annualized earnings exceed $75,000 per year, and a nonsolicit is void unless they exceed $45,000. By the statute’s terms those amounts rise to $80,000 and $47,500 beginning January 1, 2027, and rise again beginning January 1, 2032 and January 1, 2037 (820 ILCS 90/10(a), (b)).
• Confirm the signing process. A covenant is illegal and void unless the employer advised the employee in writing to consult with an attorney and gave the employee a copy at least 14 calendar days before employment began or at least 14 calendar days to review it (820 ILCS 90/20).
• Confirm adequate consideration: at least 2 years of employment after signing, or other consideration adequate to support the covenant, such as professional or financial benefits (820 ILCS 90/5).
• Check the barred categories. Noncompetes are void for individuals covered by a collective bargaining agreement under the Illinois Public Labor Relations Act or the Illinois Educational Labor Relations Act. Both covenants are void for individuals employed in construction, with exceptions for those who primarily perform management, engineering or architectural, design, or sales functions and for owners of the employer. The Act also restricts covenants in layoffs tied to the COVID-19 pandemic or similar circumstances, and covenants that would impede mental health services to veterans and first responders (820 ILCS 90/10(c), (d), (e), (f)).
• Weigh the fee exposure before sending a demand letter. If the employer sues or arbitrates to enforce a covenant and the employee prevails, the employee recovers all costs and all reasonable attorney’s fees on that claim (820 ILCS 90/25).
• Recommendation: Treat a covenant first introduced in a separation agreement as subject to the same threshold, written advice, and 14-day review requirements.

7. The separation agreement and release

• For a release of Age Discrimination in Employment Act claims, confirm that the agreement is written to be understood, refers specifically to claims under that Act, does not waive claims arising after signing, is exchanged for consideration beyond anything the individual is already owed, advises the individual in writing to consult an attorney, gives at least 21 days to consider it, and allows revocation for at least 7 days after signing. It may not bar a charge with the Equal Employment Opportunity Commission (29 U.S.C. 626(f)(1), (f)(4)).
• In an exit incentive or other group termination program, allow at least 45 days and attach the written disclosure the statute requires, including the job titles and ages of those selected and not selected (29 U.S.C. 626(f)(1)(F), (H)).
• If the agreement includes a promise of confidentiality about alleged unlawful employment practices, meet the Workplace Transparency Act conditions as amended effective January 1, 2026. Confidentiality is the employee’s documented preference and mutually beneficial, the employer gives written notice of the right to attorney review, the confidentiality has consideration separate from the release, and the employee has 21 calendar days to consider the agreement and 7 calendar days to revoke it (820 ILCS 96/1-30(a), P.A. 104-320).
• Remove any clause the employer added on its own that bars truthful statements about unlawful employment practices or recites that confidentiality is the employee’s preference. A noncompliant promise is void and severable (820 ILCS 96/1-30(b), (c)).

8. Access, property, and the closing file

• Recommendation: Time the removal of system, building, and financial access to the notice. Work from the access baseline recorded at hire, described in our new-hire compliance checklist.
• Recommendation: Give the employee a dated list of company property to return and sign a receipt when it comes back. Pursue unreturned items separately from the final check.
• Recommendation: Close the file with the reason memo, the final pay calculation, each notice with its delivery date, the signed agreement with its review and revocation dates, and the property receipt.

Three review periods can apply to one agreement

A separation agreement can carry three statutory periods: 14 calendar days for a new covenant, 21 or 45 days plus 7 to revoke for a release of federal age claims, and 21 calendar days plus 7 to revoke for a confidentiality promise. They differ on waiver. The Workplace Transparency Act lets the employee knowingly and voluntarily waive the revocation period (820 ILCS 96/1-30(a)). The federal statute requires at least 7 days and provides no waiver (29 U.S.C. 626(f)(1)(G)).

As a recommendation, calendar one schedule that satisfies the longest period, keep the 7-day revocation period whenever age claims are released, and make the separation payment due only after it expires. The firm’s Workplace Transparency Act guide covers that Act in more detail.