When an employment relationship unexpectedly ends, the employer often provides severance pay to its former employee to ease the burden of unemployment and to help the employee transition into a new job. For employers, providing severance is often the fair thing to do, particularly for employees with many years of service. Providing severance pay also provides the employer with an excellent opportunity to obtain a release of claims from the employee which provides blanket protection from any legal claims arising out of the employment relationship and allows the employer to define any restrictions on the employee’s post-employment activities.
For employees, whether or not you can obtain severance is dependant on a number of variables — such as whether you have an employment agreement that provides for the payment of severance or whether the employer has its own policy providing for severance pay in certain situations. Many larger companies that have implemented reductions in force in these uncertain economic times have provided severance pay to employees who have been laid off.
Even in the absence of an employment agreement or an employer policy providing for severance, it still may be possible to negotiate severance depending on the circumstances underlying your termination. For example, if the facts indicate that you have been discriminated against because of a protected characteristic (i.e. your race, age, gender, color, national origin, disability, etc.), you may have the leverage to negotiate severance pay to settle your claim.
Marc has substantial experience drafting and negotiating severance agreements for both employers and employees and has also litigated a number of cases involving severance issues. Marc recently represented a former employee of telecommunications giant Ericsson, Inc. in which the employee claimed entitlement to severance pay under an ERISA-based severance plan. After an adverse ruling by the United States District Court of Maryland, the Fourth Circuit Court of Appeals reversed the earlier ruling of the District Court and Marc’s client was awarded substantial severance pay. A copy of the Court’s decision can be found here.