Employees can feel overwhelmed and anxious during an employee layoff, especially if they do not have a clear understanding of their legal entitlements and potential severance pay. In general, a layoff refers to a controlled (planned) involuntary assignment and separation of one or more employees from a company. While some employers will provide an employee with a severance package or compensation, not all employers will do so in every case of layoff.
If you have lost your job and are faced with a layoff, it is very important to understand whether or not you are entitled to receive severance pay through your company’s policy, your employment contract, and because of the company’s particular situation or conditions under which employees were laid off.
Who Gets Severance Pay Understanding Severance Eligibility
The requirements for severance can differ greatly from one business to another. For example, unless the employer has a contract, there is absolutely no obligation for them to give anything in the form of severance.
Severance packages are given to employees who are terminated, usually because their company is reducing its workforce. A severance package typically contains either money, continuation of your benefits, or incentives to convince you to sign a release of any claims you may have had against your employer. Employers will usually provide an employee with the opportunity (through voluntarily separating) to receive a cash bonus if they decide to leave after a certain period.
Employees may be more likely to receive a layoff severance package when:
- The company is conducting a large reduction in force
- The employee has a written employment contract promising severance
- The employer has an established severance policy
- The employer wants to reduce potential legal risk
- The separation is part of a voluntary exit program
However, if the company did not have enough money to cover the entire work force after implementing the voluntary separation program, additional conditions may exist for termination.
Common Reasons Employers Offer Severance Agreements
When an employer terminates an employee, they will most likely provide some type of severance agreement. This is done for a variety of strategic reasons. For example, it can help to reduce the possibility of future claims by the employee by having the employee give up certain rights and receive compensation in return. Another reason for providing severance is to assist the employees who were laid off in making a smoother transition out of the company, which in turn can help to maintain workplace morale and the company’s reputation. Employers may also use severance as a method to entice employees to voluntarily leave the company before having to layoff employees.
While most employers will provide severance, the terms of each severance agreement can differ widely. For this reason, it is important to carefully read and understand your severance agreement.
Am I Entitled to Severance if I Am Terminated
Many employees ask, am I entitled to severance if they are terminated. The short answer is usually no unless one of the following applies:
- Your employment contract guarantees severance
- Your employer has a written severance policy
- A collective bargaining agreement requires it
- You negotiate severance as part of your exit
When there are no other forms of income available to you at the time of your termination, your only immediate source of financial assistance will be through unemployment compensation. However, even if you do not receive a severance package, there is still often an opportunity for you to negotiate with your employer regarding the structure and payment of severance compensation.
One thing many employees ask themselves is whether they will be able to collect unemployment if they received a severance payment in this circumstance, it depends on the structure of the severance package and state law.
What to Expect
When severance is offered, the employer typically presents a written severance agreement that outlines:
- The amount of severance pay
- Continuation of health benefits
- Any noncompete or confidentiality obligations
- The deadline to sign
- The legal claims being waived
It is important to remember that severance agreements are negotiable in many cases. Employees should not assume the first offer is final.
How an Attorney for a Severance Agreement Can Help You Negotiate
Having an attorney who specializes in severance agreements can help you better understand the offer and give you a good position from which to negotiate.
An experienced attorney can:
- Evaluate whether the severance pay eligibility is appropriate
- Identify unfavorable contract terms
- Negotiate for additional compensation or benefits
- Review restrictive covenants such as noncompete clauses
- Ensure compliance with federal and state law
Although, sometimes companies may present their severance offer as “standard”, you may be able to get better terms than what was offered in your severance agreement.
When to Contact a Severance Agreement Attorney
You should consider speaking with a severance agreement attorney as soon as you are notified of a layoff or termination. Timing matters because severance agreements often include strict deadlines for review and signature.
Early legal guidance is especially important if:
- You are part of a group layoff
- You suspect discrimination or retaliation
- You are a senior or highly compensated employee
- You are being asked to sign quickly
- You are unsure about your severance eligibility
Hamilton Law Firm regularly advises employees on severance pay eligibility and severance negotiations. Learn more by visiting our NJ Severance Agreements Lawyer page.
Work With an Experienced Severance Agreement Attorney
Don’t assume the severance package you’re offered at your job will provide you with all that you need. Knowing the laws surrounding your severance benefits and eligibility may greatly increase your financial success after separation from the company, and help you make informed choices about your benefits.
Hamilton Law Firm can assist you in reviewing and negotiating a severance agreement, and protecting your rights during an employment termination or layoff.
If you have been notified of a layoff or presented with a severance agreement, contact our team through our Contact Us page to schedule a consultation and discuss your options.