Severance Package Laws for Laid off Workers

The federal employment law does not require employers to give severance pay to laid off or terminated workers under any lay off law or firing laws, unless such a severance contract is included in the employment policy in which the company made a promise to give this benefit to terminated employees.

While employers are not legally bound to provide severance package rights, many of them offer this benefit to their workers but with certain conditions such as:

• The worker is terminated not because of misconduct (either he/she resigns or the company terminates the employment as part of its cost-cutting measure).
• The worker has spent a certain period of time in the same company.

Severance to Prevent Employment Lawsuits

One of the reasons why companies give severance package to workers is to prevent lawsuits.  According to several studies, laid off employees who received this assistance were less likely to file employment claims against their employers.

Filing a Claim for Unpaid Severance

In case a laid off worker does not receive a severance pay despite that his/her company made an oral and written promise, he/she can file claims before a federal court or report the case to the Department of Labor’s Employee Benefits Security Administration (EBSA).

Under the Fair Labor Standards Act (FLSA), employers have the obligation to give severance package to former employees if there is a written severance agreement about this, an oral promise is made by the employers, and the company has a history of providing this benefit to other workers with the same position.

Discrimination and Severance Pay

If employers decide to pay severance, they should be consistent with the policy and treat all employees equally to avoid claims on the grounds of possible discrimination based on gender, age, disability, sexual orientation, race, and age. Most employment lawyers agree, severance packages should not just include monetary assistance but other benefits as well including:

• Insurance Benefits - Some companies continue to pay its former workers’ health, disability, or life insurance.  However, some employers are legally bound to provide such benefits under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA).
• Referral - Some employers refer their laid off workers to other companies to help them find job.
• Trainings and Programs - Some companies offer crash courses that will train workers to have new skill, allowing them to find jobs.
• Outplacement Services - These include career counseling, tips on writing a resume, and practice interview sessions that will help laid off workers find new employers.

• This article is provided for informational purposes only. If you need help with an Employment Law Problem, please click here to consult with Rodney Mesriani or an Employment lawyer in your area.