October 14, 2026
When an employee quits, get the resignation and last day in writing, then work through the exit in order. Pay final wages on your state’s deadline, send the required benefits notices, recover company property and access, remind the employee of their confidentiality and IP obligations, and handle their equity. Most of this can be done in a few days, and none of it should wait until after they’ve gone.
Key takeaways
Sometimes. If the reason is fixable, such as role, growth or pay, a conversation is worth having. If they’re leaving for a better fit or personal reasons, a smooth exit usually serves everyone better.
If you do make a counter-offer, don’t promise equity, a title or a raise on the spot. Get board approval for any grant and put the new terms in writing. Verbal equity promises are a common source of disputes later. See Promising Equity vs Issuing Equity.
Ask for the resignation in writing, with the last day. An email is enough. You can accept the resignation effective immediately rather than having them work out the notice period, and for anyone with access to production systems or sensitive data, a short exit is common. In some states, ending employment before the date the employee offered can be treated as a termination for unemployment purposes, so consider paying through that date.
Then confirm the end of employment in writing. For a voluntary resignation, a separation acknowledgment is usually all you need: a one-page letter, signed only by the company, confirming the last day and reminding the employee of their existing obligations. A separation agreement, with severance in exchange for a release of claims, makes sense only if there’s a dispute or a risk of one. See Separation Agreement.
State law sets the deadline. In California, an employee who quits without notice must be paid within 72 hours, and one who gave at least 72 hours’ notice must be paid on their last day. In New York, final pay is due by the next regular payday. Other states range from immediately to the next payday.
Final pay includes all wages earned through the last day, plus earned commissions and bonuses. Whether unused PTO must be paid out depends on the state and your written policy. California requires it, and many other states follow the policy. You can’t hold back final pay until a laptop comes back. Most of the state notices on What Do I Need to Do When an Employee Is Fired? apply to resignations too. In California, the change-in-status notice and the unemployment insurance pamphlet are required only when the company ends employment, though handing them out anyway does no harm. In New York, send the written notice of the last day and the date benefits end within 5 working days, as you would for a firing.
If you have 20 or more employees, federal COBRA lets the employee continue your group health coverage at their own cost, and you or your plan administrator must send the COBRA notice. Smaller employers are often covered by state continuation laws instead, including in New York and California. Your broker or PEO can tell you which rules apply and handle the notices, along with any 401(k) and life or disability conversion notices.
Pull the employee’s signed CIIAA and any non-solicit, and remind them of their continuing obligations in the separation acknowledgment. Confidentiality and IP assignment survive the end of employment. Many CIIAAs also call for a termination certificate, in which the employee confirms they’ve returned all confidential information and disclosed any inventions. Ask them to sign it.
Non-competes are a different story: we recommend against them for employees, and many states won’t enforce them. See Non-Compete Clauses, Non-Solicitation Clauses and CIIAA.
For restricted stock, the company has the right to repurchase unvested shares at the price the employee paid (for stock bought at formation, typically $0.00001 per share). The employee normally pre-signed a stock power with their restricted stock purchase agreement, so the company fills in the blanks, pays the repurchase price and takes the shares back. Repurchased shares go back into the equity plan’s pool (or become authorized but unissued shares, depending on the plan). Most agreements give the company a deadline, often 90 days, so calendar it. Vested shares stay with the employee, subject to the company’s right of first refusal.
For stock options, unvested options are cancelled and return to the pool. Vested options can be exercised during the post-termination window in the plan, usually 90 days, and then lapse. ISOs exercised more than three months after employment ends are taxed as NSOs. Tell the employee the exact deadline in writing.
Update the cap table after any repurchase or cancellation. See What Happens to Startup Stock and Options When You Leave the Company?
Before the last day, have the employee document their work and walk a colleague through open projects, accounts and passwords for anything they own. Tell the team who is leaving, when, and who is picking up their work, and tell customers who worked with them about the transition. An exit interview is optional but often useful.
If you’re asked for a reference, many companies confirm only dates and title. Whatever your approach, apply it consistently and keep anything you say factual.
For related reading, see What Do I Need to Do When an Employee Is Fired?, Unvested Shares and What Should Founders Know About Startup Employment Law? If you’d like help with a departure that involves severance or a dispute, contact us.
