Is the Discharged Employee Entitled to Severance?

{4:15 minutes to read}

 In my last article, we discussed termination of an employee and the implications affecting both parties—employer and employee. This article continues the employee-termination discussion in regards to severance.

Employees are only entitled to severance if provided for in an employment contract.

Severance, where provided for in a contract, can, especially with senior-level executives, be for quite a large amount of money. If there are severance provisions, typically there will be contractual definitions of termination for “cause”; in those instances, employees terminated for “cause” will usually not be entitled to severance. As is the case where “cause” is the lynch-pin for determining whether termination is permitted as described in my last article, whether or not “cause” existed is often disputed by the parties, as it is the lynch-pin for determining whether the employee is entitled to severance.

The decisions by the parties as to how to handle a discharge are often influenced by practical concerns as well. For the employer, the reason for termination may not have been illegal or violative of a contract with the employee, and, therefore, the employer may rightly conclude that the employee is not entitled to any severance. However, the discharged employee may not agree with the employer’s assessment. The employer may consider the culture of the company, such factors as the employee’s length of employment and the reason for termination, and seek to ensure that the action it takes, and the message it sends, is consistent with its values, the company’s culture and its business interests.  These consideration may inform the employer’s decision as to whether it is appropriate in a given situation to offer any severance, even if not required to do so. Whenever an employer is providing severance, or anything else of value to an employee that it is not legally obligated to provide, the employer should insist on receiving a release in exchange. This release should be prepared by counsel, as the release of certain claims afford the employee with some protections.

For the employee, oftentimes overcoming the emotions of being fired is difficult, and she may feel that she was somehow discriminated against. However, feeling that one’s employment was terminated as a result of discrimination and the termination actually having been the result of discrimination can be two very different things. An employee who seriously believes that her termination was the result of discrimination should consult with an attorney immediately, so that her claim can be evaluated; if there is merit to it, there are actions that she must take, quickly. And if there is no merit to the claim, she should try to resolve any outstanding matters with her former employer—she may have been offered some severance in exchange for a release, and the employer may be willing to offer things that would be helpful, such as outplacement services.

The separation letter should be reviewed by her attorney and, perhaps, negotiated where appropriate. Oftentimes, there is a deadline by which the employee is required by the employer to sign a separation agreement; the employee should not assume that the employer will ignore its own deadline, so she should consult with an attorney very quickly. Also, if an employee is entitled to or being offered severance, she will in most cases not begin to receive it until she signs and returns the agreement and any revocation period has passed. When she puts these issues in her rear-view mirror, the  employee can then begin the difficult work of finding new employment.

No matter the path both parties take to reach their decision, it is beneficial for both parties to evaluate the situation objectively, at the time of discharge, make informed decisions, and take whatever steps are necessary and appropriate to move forward.

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