Severance Pay and Termination Pay Differ Wrongful Termination Cases
When a company has to let employees go, they generally offer them a severance package as a way to soften the blow. The amount of the package is based on how long the employee has been working for the company and the job title. Oftentimes, severance packages include the pay an employee was making when fired and additional compensation, like accrued vacation and sick time, and unreimbursed business expenses.
Depending on the circumstances of the firing, some companies are legally required to provide severance packages to terminated employees. For example, the Worker Adjustment and Retraining Notification (WARN) Act requires companies to pay severance to workers affected by a mass layoff or plant closing.
It is also not uncommon for severance packages to include continued health insurance coverage and outplacement assistance, which can help employees find new jobs. However, severance packages are not a necessity in every termination situation and can be waived by the wrongful termination employee. Some severance packages also contain a non-compete clause or other restrictions on the employee’s ability to compete with or speak negatively about their former employer.
How Do Severance Pay and Termination Pay Differ Wrongful Termination Cases?
A lawyer can help the terminated employee review a severance agreement to determine whether it is enforceable. If a lawyer deems that the severance agreement is not valid, the terminated employee can still file a wrongful termination claim.
If a company fires an employee for a reason that violates employment laws, the fired worker can sue for wrongful termination. For example, the termination may be a violation of anti-retaliation or discrimination laws. A wrongful termination lawsuit can be filed to recover damages, which could include past and future lost wages, attorney’s fees, and any punitive damages awarded by a court.
For example, a fired employee who is paid an agreed-upon severance package may be able to sue for a violation of the retaliation and/or harassment laws. In addition, a severance agreement that violates the laws regarding age discrimination may result in a lawsuit against the company.
It is not a requirement for employers to offer severance packages to their terminated employees, but if the employment contract or employee handbook specifies that the employee is eligible for one, then the company must grant it. Moreover, if the employer is required to provide a severance package under WARN or other legal requirements, such as a waiver of an employee’s rights to sue, then it must do so.
However, if an employee intends to start a competitor or make a complaint against the company over a wrongful termination, they should not agree to a severance agreement and should consult with an experienced employment law attorney before accepting the offer. An experienced attorney can advise the terminated employee on their best course of action and help them negotiate a better severance package or decline it.
