When you’re unexpectedly let go from your job, many things will go through your mind. How will you pay your rent next month? Will you be able to afford all your bills? A sudden halt in income can be detrimental to anyone, but it’s even worse if you have children that are dependent on you for food and shelter.
A way many companies support their employees even after letting them go is by giving them a severance package at the time of their termination. Severance packages range from two weeks’ pay to compensation for unused PTO days. Some companies examine how long the employee has been with the company and pay them severance accordingly. Sometimes, an employer will offer a severance package in exchange for the employee agreeing not to sue for things like discrimination, unpaid wages, or wrongful termination.
However, severance pay is not a given, as it’s usually left up to the company’s discretion since there is no requirement in the Fair Labor Standards Act regarding severance pay. The fact that there are no concrete severance pay laws in place at the federal level can make it hard to know if you should contact a lawyer.
Situations Where Severance Pay is Required
Most states do not require employers to pay severance, but you can look at your state’s individual severance pay policies here. Even though your state may not have a law in place regarding severance pay, it’s possible that your employer gave you evidence to believe you would be offered a severance package upon termination when you were first hired. In this case, it’s possible you could sue for severance pay if it was never given.
Other situations where an employer would be legally obligated to pay severance are listed below:
- A written contract stating that terminated employees would be paid severance was presented to the employee at some point during their employment
- The employee handbook or personnel policies state that employees would receive severance pay
- The company has a history of paying severance to other employees in the same job position
- The company or supervisor made a verbal statement to the employee that they would receive severance pay
Severance pay is often given out by companies as padding against a wrongful termination lawsuit or any other lawsuit. A severance check serves as a token of goodwill from the company since it can sweeten a sour situation. Their reasoning is that an employee will be less motivated to reach out to a Newport Beach workplace lawyer if they already received some sort of sum.
What a Severance Package Typically Includes
Severance packages vary depending on the size of the company, how long the employee worked for the company, and the scope of the job position held by the employee. The average components of a severance package are listed below:
- Money – This topic is top of mind to recently laid-off employees. The average severance package will often include a week or two’s worth of pay for each year that an employee was with the company. The company can also pay them for unused PTO.
- Insurance and benefits – Some employees will agree to provide a terminated employee’s heath, life, and disability insurance for a specified period of time following termination. Continued benefits usually last for about a month after termination or until the end of the same month that the employee was terminated.
- Uncontested unemployment benefits – Terminated employees often file for unemployment benefits. Most of the time when an employee files for unemployment benefits, their previous employer has the opportunity to contest the employee’s claim. If your employer explicitly states that they will not contest the claim, then the employee is more likely to get those weekly unemployment benefits.
- Letters of Recommendation – Unless an employee was fired for serious misconduct, the company will often offer to write a letter of recommendation for their next job. However, it’s up to the employee’s discretion to decide whether or not they want a company that fired them to act as a reference or provide a letter of recommendation for their next job.
The most important thing to remember when you are laid off is that severance pay is negotiable, meaning that you can contact an attorney to aid you in getting as much compensation as possible.