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Are You Entitled to Severance Pay if Your Job Ends?

When you learn your job is ending, it’s stressful. You have bills to pay and necessities that you cannot live without. You may be supporting a family. Your employer is legally required to pay you for unused sick, personal, and vacation time. They have to pay your wages for the final week of work. After that last paycheck, you’ll be left with no income until you have another job. Severance pay helps you cover bills for a while, but are you entitled to it?

Many people do not realize that there is no government requirement for a company to offer severance pay if it lays off employees or shuts down operations. The Fair Labor Standards Act (FLSA) provides a lot of protection to today’s employees. It helps establish rules for all full-time and part-time employees regarding:

  • Overtime Pay
  • Child Labor
  • Minimum Wage Policies
  • Recordkeeping (Statements/pay stubs regarding employee information, total hours worked, wages, overtime pay, taxes withheld, dates of that pay period, etc.)

But, the FLSA doesn’t require employers to pay workers severance pay. Severance pay is something your employer may offer, but it’s not a guarantee. You only get it if it’s in your employee contract or hiring agreement or your employer makes a mistake following the WARN Act.

The WARN Act May Offer Some Protection

You may not qualify for severance pay, but the Department of Labor does have the Worker Adjustment and Retraining (WARN) Act. For this act to apply to a company, there must be 100 or more full-time employees within the company or 100 or more full- and part-time employees working a total of at least 4,000 regular (not overtime) hours per week. In addition, the plant closing or mass layoff must meet these requirements: 33% or more of the full-time employees are going and that total meets the minimum of 50 full-time employees.

If a plant has 100 workers and lays off 33 workers, that is 33%, but it doesn’t meet the 50+ workers rule, so the WARN Act wouldn’t apply. The owners may opt to give notice anyway, which is ideal, but they’re not required to.

The WARN Act rules that employers must give a minimum of 60 calendar days to allow workers time to find new jobs or enter a training program to make it possible to find new jobs. Skill training programs may be useful if the worker is in a limited field where jobs are impossible to find.

What happens if your company fails to give you any notice though it was legally required through the WARN Act? If that happens, your employer made a costly mistake as they may now be legally required to provide severance pay. If you weren’t given 60 days notice and believe your employer meets the aforementioned requirements, it’s important to talk to an employment law attorney.

What Does Severance Pay Typically Cover?

When it is available, it’s given to you when your job ends through no wrongdoing on your own. If you stole from the company or failed to show up for another shift without calling in, that’s your fault You don’t get severance pay when it’s your fault. If your company of 200 employees decides 30% of the workforce needs to be laid off to prevent bankruptcy, it’s not your fault and you should qualify.

You may be entitled to a wage and insurance package if your company asks for workers to voluntarily resign and you agree. These are typically designed for employees who are nearing retirement age and are called an early retirement package. Before you agree, make sure the offers made with a voluntary resignation are legally binding and benefit you rather than the company. It’s best to ask a lawyer for advice before you agree to an early retirement package or another voluntary layoff package.

What’s in a normal severance package? It goes beyond pay for a set number of weeks or months. A severance package may also include discounted health and dental insurance for a period of time, assistance finding a new job, or some help paying for job training if your skills won’t make it likely that you’ll find another job in the current job market. If you have a 401k plan, that is your money. Be aware that if you start drawing off it and are not of retirement age, you may be required to pay taxes on it.

The amount of pay varies. Most companies offer a week or two of pay for each year you’ve worked for the company. If you’ve been with your employer for 10 years, you may get 10 to 20 weeks of pay. That gets you around two to five months of income. It gives you time to find a new job.

If you do get severance pay, you may need to decide if you want it in a lump sum or paid each week. Depending on your choice, it can be harder to get unemployment benefits. If you get a lump sum, you need to make sure you’re spending that money wisely and not spending it all at once. If you do that, you end up short weeks into your layoff. If you haven’t found another job by that point, you risk being unable to pay your rent, mortgage, or other important bills.

A severance package isn’t a decision to rush. Before you get the package, your employer may require you to sign a non-disparagement agreement. It’s meant to prevent you from saying anything negative about your employer, your employer’s products, or your supervisors. If you sign this, you need to be careful what you say in places that can get back to your employer. A social media post that talks about how horrible your company is could land you in a lot of trouble.

If there is a non-disparagement agreement, see if it works both ways. Can your boss say negative things about you? Seek counsel from an employment attorney if you’re not certain what the agreement means.

Are You Sure You’re Entitled?

It’s time to do some reading and make sure you qualify. Get out or load your employee handbook. Find the severance pay policy or information on layoffs. The information you need should be in there. It can also be in your employee contract, if you signed one when you were hired. Read the terms. Most severance pay policies require you to have met requirements regarding how long you’ve been employed there. If you’re a new hire, it’s unlikely you’ll be covered. If you’ve been there for a year or longer, you’re more likely to be protected from layoffs.

What if you’re told no and you believe you do qualify for severance pay? You’ve gone over your contract or rules set forth in your employee handbook and read up on the company’s severance pay policy. You believe you should get severance pay, but you’re told you’re wrong and not given a satisfactory explanation? What do you do?

Contact an attorney that specializes in employment law. Do not let fear of the cost of legal fees keep you from reaching out. Shegerian Conniff offers free consultations and often works on a contingency fee basis. This means you don’t pay us unless we win your case, so there really is no risk to you. You shouldn’t let financial worries keep you from seeking fair treatment after an unexpected job loss.

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