In today’s harsh economy, the possibility of getting fired is cruel reality. But there is something that can dull the pain, and that’s severance pay. Although there is generally no obligation for an employer to offer or pay severance pay there is however, a legal obligation in some instances.
If you were and believe you qualify for severance pay, you may have a legal claim. Here’s a section of my book “The Employee Rights Handbook” that deals with just that. Read now and get informed!
Offers of Severance Pay
Although there is generally no legal obligation to pay severance monies, most employers in the United States do offer such payments when a firing is due to a group layoff, business conditions outside the employee’s control (such as reorganization), or reasons other than employee misconduct. However, there may be a legal obligation to pay severance when:
- You have a written contract stating that severance will be paid
- Oral promises are given regarding severance pay
- The employer voluntarily promises to pay severance
- The employer has a policy of paying severance and this is documented in a company manual or employee handbook
- The employer has paid severance to other employees in similar firings and thereby has created a precedent
If you are fired and are not offered severance, it is advisable to request a meeting with a qualified representative of the employer to discuss clarification regarding severance and available wage equivalents.
Many employers are fearful of the increasing amount of employee-related litigation and are flexible in easing the departure of terminated individuals. Thus, you should begin the discussion by appealing to corporate decency and fair play. For example, it might be stated that severance pay is needed because you anticipate it will take longer to find a suitable job than the amount of severance currently offered. Always be polite and act professionally; being vindictive or making threats won’t solve anything.
Most employers have different policies regarding severance depending on the industry and company. However, it is recommended that you attempt to receive one month of severance for every year worked as a starting point. If this can be achieved, you can leave the company knowing that you have received a fair severance offer.
Although severance pay is a common problem for individual employees whose employment has been terminated, the extensive merger and acquisition activity in recent years has caused the issue of severance pay to become one of large-scale financial and legal significance. If your company is sold and you continue to work for the new employer, you may be able to assert rights under ERISA and welfare benefit plans in the event the new employer denies severance to a group of workers at a later date.
Additionally, you may have grounds for a valid lawsuit in the event you have a vested pension but are fired just weeks short of becoming entitled to greater severance, larger monthly pension payments, and improved medical and insurance benefits.
Cases demonstrate the responsibility of employers to comply with all pension laws and ERISA regarding severance when a business is sold or when company policy has created an expectation that the purchasing company will continue an established severance policy crediting employees with prior years of service from the selling company.
If you begin working for a new employer who ceases business operations (i.e., declares bankruptcy) within a relatively short period of time after the hiring, you may have a valid claim of severance from the selling company under certain conditions.
Courts are beginning to recognize the rights of employees to severance in many situations, particularly when there is a massive layoff or group sale of assets due to a merger or acquisition.
STRATEGY: You should not automatically acquiesce to a denial of benefits if you are fired and not offered severance, whatever your particular situation. Most workers are now receiving severance when they are fired; others are negotiating and receiving greater severance than the company’s first offer. Statistics from the author’s law practice support this.
Always Ask for More
Do not accept the company’s first offer of severance if possible. Always request a negotiating session to obtain more benefits. If you’re pressed to accept the package offered or to sign any type of form, refuse. Tell the employer that you need time to consider without specifying whom you’ll be discussing it with. Make an appointment for another meeting several days later. This will give you time to speak to your lawyer or advisor and formulate a response to the initial severance offer.
After contacting employers to negotiate more generous severance packages on behalf of fired workers, not once has an employer revoked the initial offer made to a client. In a minority of instances, they will say, “Mr. Sack, it’s the best we can do, take it or leave it (by X date).” But employers or their counsel have never revoked the offer in spite because they were contacted. This is probably due to the fact that since there is generally no legal obligation to offer severance, the fact that an offer was made can be viewed as an employer’s attempt to buy peace and avoid litigation.
Although there is generally no legal obligation to pay severance monies, employers in the United States do offer such payments when a firing is due to a group layoff, business conditions outside the employee’s control (such as a reorganization, downsizing, job elimination, or other “neutral” factors), or for reasons other than employee misconduct. However, there may be a legal obligation to pay severance when:
- You have a written contract stating that severance will be paid
- Oral promises are given regarding severance pay
- The employer voluntarily promises to pay severance
- The employer has a policy of paying severance, and this is documented in a company manual or employee handbook
- The employer has paid severance to other employees in similar firings and has thereby created a precedent
If you are fired and are not offered severance, it is advisable to request a meeting with a qualified representative of the employer to discuss clarification regarding severance and available wage equivalents. As you will learn, there is generally nothing to lose and plenty to gain.
The amount of severance pay offered is typically derived from a formula based on a person’s length of service (e.g., two weeks for every year of work), but each company and industry is different. People who work in publicity-conscious industries, such as advertising, often receive greater severance packages than those working for heavy manufacturing concerns, especially when they worked many years or made significant
The ability to request a better severance package is greatest when you alone have been singled out for firing. When a job elimination affects a large group of workers, each will have a tougher time getting a better package. In such a case, a company’s standard response is often: “We would like to offer you more, but then we have to offer the same benefits to everyone fired in your department to be fair and consistent, and we can’t afford it.”
Even if you are fired as part of a group, you should still request an appointment to ask for a better package. Go for it, since you have nothing to lose. The goal is to try to demonstrate that you are different from the pack, that your special achievements warrant a better package, or that your personal situation (e.g., caring for an infirm parent) requires that you be treated differently. Your efforts can work if the company believes giving you more is fair or decent and you will keep your mouth shut and not reveal the more favorable terms to others. If applicable, tell the company that you will sign a gag order clause in a separation agreement, with hefty penalties if you ever reveal the terms of the settlement to anyone other than your lawyers, accountant, or spouse. The company may be willing to accommodate you provided you sign a release, especially if you are over forty, a female, a minority, or in a protected class. It may view giving you additional benefits worth it when you sign a release agreeing not to sue and agreeing to keep quiet.
STRATEGY: Ask for more severance and other perks when you are fired, regardless of the circumstances. This is so even when you are told the company never deviates from its established policy. Bosses who do the actual firing are not typically the ones who negotiate the package. This is done by someone from human resources or a company lawyer. If your proposal is presented early and professionally, it may be viewed as an honest attempt to reach an agreement, regardless of how much more you’re asking for and even if you were fired along with others in your department. You’ve already been terminated: what more harm can an employer do to you?
For a full depth analysis on this topic and many more, visit http://legalstrategiespublishing.com/ to purchase “The Employee Rights Handbook” today!
