Question:

I have worked for the same company for 15 years. Do I have a right to severance pay if I quit my job or am laid off?

Answer:

It depends. The law normally does not require an employer to provide severance pay on termination of employment. There are, however, certain exceptions.

If you have an employment agreement (written or oral) with your employer that provides for payment of severance on termination, then you have a right to the severance pay promised under that agreement. Note that the terms of the contract may provide that severance payments will be made only under certain circumstances, and may base the right to or amount of severance on your years of service with the company. For example, the agreement terms may require severance payments to be made only if you are laid off or if your employment is terminated by your employer, but not if you voluntarily quit.

If your employer has a policy or practice of paying severance, then you may have a right to severance pay on termination. Often such a policy is stated in your employer’s employee handbook or policy manual. Here too, the terms of the policy or course of practice may allow severance payments to be made only under certain circumstances. For example, some severance policies require that you work for your employer for a minimum period of time, or that you provide notice two weeks prior to termination, before your employer is obligated to pay you severance on termination of your employment. Some policies may require that severance be paid only when the employer causes the termination of your employment, not when you voluntarily quit. Your employer’s human resources department should be able to tell you if your employer has a policy or practice of paying severance, and what the eligibility requirements are under such policies or practices.

Severance pay may be offered during your termination in exchange for your agreement not to bring certain claims against your employer relating to your employment, usually called a “Release of Claims.” The severance payment is the consideration the employer pays you to “release” the employer from liability and agree not to sue the employer for certain claims you may have at the time of your agreement, whether you are aware of any claims at the time or not. Note that if the employer is already obligated to pay you severance on termination under your employment agreement or the employer’s policy, the payment of severance (something the employer is already obligated to do) cannot serve as the consideration for the release of claims. The employer in such a situation would be required to offer a separate additional amount in consideration of your agreeing to be bound by the release of claims. While employers may voluntarily offer severance pay as a benefit to employees to assist them, the fact that an employer offers severance pay in exchange for a “release” does not necessarily imply that the employer has done something illegal or has something to hide. Some employers offer severance pay in exchange for a release as a matter of policy. If an employer offers to pay you severance in exchange for your release of claims, you have a right to the severance payments promised in the release once you sign it and continue to abide by its terms.
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