Severance Agreement FAQs

By Michael L. Fortney


Must employers provide severance pay?

No. An employer has no obligation to provide severance pay. The only benefit that employers must by law provide is unemployment compensation.

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If my employer has a severance plan, do I get benefits?

If an employer creates a severance plan, the employees covered by the terms of the plan are entitled to the benefits that the plan provides upon the occurrence of the event that triggers benefits. However, an employer may create, modify or abolish a severance plan as it sees fit. Most employers choose to have no severance plan at all.

If your employer has a severance plan, you are entitled to a written summary description of it. The plan description will tell you what, if anything, you are entitled to receive.

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I have to agree not to sue to receive severance pay. Can they do that?

Yes. So long as the employer writes the plan to condition a release of rights (i.e., a promise not to sue) on payment of any severance benefits, you must agree not to sue your employer in order to receive them.

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Why do I have to wait 21 (or 45) days to accept my agreement?

In order for your promise not to sue for age discrimination to be enforceable, employers must give you time to consider any offer. This is designed to prevent "gun to the head" decisions by employees. As a legal matter the employer cannot rescind the offer during the waiting period, giving you time to consider it. However, the waiting period is for your benefit. Generally speaking, if you want to accept the offer before the end of the waiting period, you can do so.

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What happens if I ask for a better package?

Technically, once you ask for a better package you have "rejected" the employers offer by making a "counteroffer", which the employer can accept or reject. Therefore, you run the risk of losing the guaranteed offer by making a counteroffer. However, in practice most employers will not rescind their offer if you make a counteroffer, but will leave their original offer on the table if they do not want to negotiate it. To be clear, though, you must be prepared to lose the offer if you make a counteroffer.

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I do not know what my rights are worth. What should I do?

Consult legal counsel to evaluate any claims that you may have. Find out what your claims are worth if you were to win, the chances that you have of winning and the attorneys' fees and court costs that you will pay in an effort to win. You should then compare this (plus the aggravation and uncertainty of litigating) to the benefits offered by your employer.

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Are there any "rules of thumb" for how much severance an employer will pay?

No, but we will offer some anyways.. Again, an employer has no obligation to provide severance payments. Employers rarely offer severance pay to hourly workers.   Employers who offer severance will typically provide one week per year of service to employees below the officer or executive rank, and up to a month per year of service to executives and officers. In addition, some severance plans cap benefits at a specified level, such as one week or month of severance pay for the first 18 years of employment.

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How do I learn more about this topic?

Check Fortney & Klingshirn's Employment law legal links for the actual discrimination laws and other employment related sites. 

You can also contact us with a specific question. We do not guarantee an answer and charge $200.00 for an initial consultation. We therefore look at our email inquiries as an opportunity to help you decide whether a consultation makes sense for you. We look forward to hearing from you.

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