Perhaps you’ll be surprised to learn that there is no federal law that specifically requires employers to offer severance pay to employees when employment relationships end.
Offering severance pay is voluntary for employers, as is offering other employee benefits that are not required by law.
Employers have traditionally offered severance pay anyway, as “conscience money” to help employees survive layoffs or to compete with other employers in the benefits arena.
Tradition aside, these days employers offer it mostly as a “bribe” to encourage departing employees to sign agreements (contracts) that waive their legal rights to sue the employers. It’s likely to be a “legal” bribe, as long an employer doesn’t also stick a loaded pistol in an employee’s ear to coerce him or her to sign under duress.
Once severance pay is contractually arranged between an employer and employee, whether as a “bribe” or a fringe benefit, then providing it is no longer voluntary for the employer, as long as the employee did nothing wrong to invalidate the contract.
But contracts don’t always have to be in written form to obligate employers to provide severance pay. For example, if you’re a salaried employee whose employer has a history of providing severance pay to all salaried employees when terminating their employment under a layoff, then your employer might owe it to you too, if you get the axe in the next layoff.
That’s because, under contract law, an implied contract might have existed between you and your employer, based on your employer’s tradition of providing severance pay to all salaried employees during layoffs.
Besides contract law, other laws too might function as “severance pay laws”. For more information, read “Severance Pay” under Wages & Pay. Consult an attorney for legal advice.
