Severance Pay Laws

Currently, there really are no severance pay laws in the United States. Severance pay is often offered as "conscience money" which is often a bribe by employers to ask departing employees to surrender their rights to file a lawsuit against them. As far as the FLSA or similar acts are concerned, severance pay is an optional part of an agreement in the employer's contract. Whenever employees or independent contractors work under explicit contracts, whatever terms the contract states are enforceable by contract laws. Thus, if a promise of severance pay is written in the contract but they fail to provide it without good cause, this is a breach of contract. Defamation and discrimination laws can also protect employees when it's apparent that other former coworkers employed at the same capacity received severance pay when they didn't.

Fast Facts

  • In absence of severance pay laws, few regulating governmental agencies fight for terminated employees who haven't received severance pay.
  • Even if severance pay is not offered, there is no law saying you can't negotiate it. Employers may be happy to offer it to avoid lawsuits or attrition.
  • The Employee Benefits Security Administration might help employees collect severance pay if included in a written contract, but it's best to hire a lawyer before contacting them.

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