What Employers Should Know About Severance Pay | Mann & Elias
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What Employers Should Know About Severance Pay

Why You Should Consult with an Employment Attorney Before Issuing Severance Pay

As an employer, chances are you have a severance policy in the employee handbook or reference the terms and conditions on the company website. By making the policy accessible to employees you are limiting a few legal risks, had it not been available. Employees are vital for the success of a business; therefore, a severance package should reflect that relationship as opposed to limiting their rights in a binding contract. In this article, we review what employers need to know and why you should pursue legal help with severance pay negotiations in Los Angeles.

Laws Around Severance Pay

There are several types of severance employers can offer an employee. It is not always monetary but can be of monetary value. A few examples include:

  • Insurance – employers may continue health insurance benefits for an employee as they pursue other employment. Whether an employer decides to continue paying is completely up to the company.
  • Unemployment – employees that were fired or laid off can claim unemployment benefits if their termination was not based on serious misconduct.
  • References – employers can offer terminated employees a letter of reference for future job opportunities.

There are many possibilities to choose from if you want to offer a severance agreement. However, if you do so it must be done properly under the law. In California, there is no legal requirement that employers must offer final pay to employees, which is why federal agencies pay close attention to such binding agreements. To avoid the possibility of getting sued, have an employment attorney in Los Angeles review your policy and contractual agreement.

The Fair Labor and Standards Act (FLSA) is a federal policy that protects workers by:

  • Establishing set wages
  • Enforcing working standards

Because there are no federal laws requiring businesses and companies to offer employees severance if they are fired, the organization is generally quiet. However, FLSA may intervene if the state you reside in enforces its legislation. There are a few policies that employers should keep in mind, such as accrued and unused vacation time. When an employee gets fired, employers are legally obligated to reimburse for unused time through the designated termination date.

Cal-COBRA vs. COBRA

Cal-COBRA is a California law that allows employees to keep their health insurance plan when their job comes to an end. It applies to employers and health plans that cover between 2 to 19 employees.

Federal COBRA, on the other hand, differs in one way. It allows employees working for larger companies to extend their health plans after termination. It applies to their spouses, former spouses, and dependent children too.

Recipients can expect to get a notice in the mail to learn more about their COBRA or Cal-COBRA rights. Upon receiving it, they have 60 days to sign up. Employees who don’t receive a notice in the mail will reach out to you (the employer) and their health plan for more information.

WARN Act

The WARN Act (Worker Adjustment and Training Notification) requires businesses with more than 100 workers to give employees 60 days’ notice before issuing a layoff. This cautionary period allows them to:

  • Plan with their families
  • Apply for alternative opportunities
  • Obtain skills training/retraining in preparation for a busy job market

Without adequate warning, employers will be obligated to offer mandatory severance pay according to federal law. An attorney for severance pay in LA would recommend that you reach out to the Employment Development Department (EDD). There are specific criteria to file a WARN notice in California. Just mailing a letter is not a viable option. It should also include specific language to verify that everyone has seen and read the terms of conditions.

Before getting started, understand exactly what the company has agreed to provide staff after terminating or laying someone off.

Why Should Employers Offer It?

Offering severance packages is one way to avoid a potential lawsuit and having to retain a workplace lawyer in LA. Outside of the legalities, it is also a great way to maintain a good relationship with former employees if a new opportunity arises down the road. As a gesture of goodwill, the company itself becomes more marketable and demonstrates that employees are valued. If for example, an employee over the age of 50 got laid off without an opportunity to request severance, it can negatively reflect the business in two ways:

  • Not only is the employee blindsided by this termination, but there is also no outplacement support
  • He/she might view it as age discrimination and file a lawsuit against the company

Laying employees off is a difficult decision just as it is to be on the receiving end. It is worth considering, as it reduces the chance of multiple lawsuits.

What To Include In The Policy

It takes time to craft and prepare the right severance agreement. We recommend working with your HR team, employment lawyer, or both to establish the company’s policy. The following should be noticeably clear:

  1. Which employees are eligible
  2. Payment policy, services offered, the continuation of benefits
  3. Required paperwork (to be signed) for an employee to receive severance
  4. Disclaimer that the employer can alter or terminate the policy under certain circumstances

Once a policy is drafted and approved, it should be included in the employee handbook and explained to new hires during the onboarding process. In doing so negotiations (if any) will become more of a straightforward, simplified process. If you have additional questions regarding severance pay or would like to retain our services to review your policy schedule a consultation today!

About Mann & Elias

The Law Offices of Mann & Elias is an employment law firm that provides guidance and legal support for individuals facing issues in the workplace. We represent clients at every level of the state and federal court systems in lawsuits regarding discrimination, wrongful termination, unpaid wages, and more. When your case is in our hands, we hope to minimize stress and concerns associated with work.

Workplace disputes and negotiations can be complicated and uncomfortable between an employee and employer. In many cases an employer can retaliate, causing individuals to feel that they are at a great disadvantage in the company. When you retain one of our lawyers, you will be well-protected and advised. While there are thousands of lawyers to choose from, we strongly believe our success is based on:

  • 50+ years of trial experience
  • Excellent advocacy skills
  • Intense preparation and research
  • Quality care

Since our partnership began over 20 years ago, we have settled hundreds of claims, completed 100 jury and bench trials, and recovered more than $18 million in settlements. In the end, our goal is to understand what you need and achieve the best outcome for you by focusing on those needs. For dedicated representation with no upfront fees, give us a call at 323-866-9564 or email info@mannelias.com.

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