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Who is Eligible to Receive Severance Pay?

Are you eligible to receive severance pay for your position?

We often find that talented workers, who command substantial salaries, do not understand their rights when it relates to severance pay. So, we’d like to devote this post to gaining a better understanding of severance and compensation packages for highly compensated employees.

Who is Eligible to Receive Severance Pay?

According to federal and state law, employers are not legally required to provide employees with any severance pay. Eligibility for severance pay thus depends upon the employer’s policies, or a separate contract between the employer and employee. The bottom line is that the law does not require an employer to offer anybody a severance package or severance pay.

However, the employer must honor a contract to provide an employee severance pay or follow the employer’s severance pay policy. Employers which have severance pay policies generally provide severance based upon a specific formula which often depends upon an employee’s years of service and/or compensation.

Restrictions on Severance Pay in an Employment Contract

It is very important to know that there are ways to lose severance pay if an employee violates the terms of any contract which provides for severance pay. We always recommend reviewing your employment contract with an employment attorney before signing anything. That’s the best way to guarantee you won’t inadvertently disqualify yourself from severance pay later.

What are some of the typical contractual restrictions to severance pay which could cause you to lose money?

  • Severance agreements often contain non-compete and/or confidentiality agreements which limit where employees can work after they leave the job and what they can say to others about their severance.
  • After leaving the company, the severance agreement may limit what you can write or say about your former employer. Generally, the severance agreement prohibits employees from writing, saying, or posting anything negative about your previous employer including any messages on social media and other digital platforms.
  • Severance agreements most often require you to return all company property and other materials you received during your employment.
  • Finally, severance agreements generally require employees to never reapply to work there again.

You can learn more about these matters by reviewing our previous work on the facts you need to know about severance packages.

Negotiating Your Way Toward a Severance Package

There are a few ways you can make yourself eligible for severance pay through savvy negotiation prior to accepting a position. Here are a few suggestions for how to convince your potential employer to offer your a severance package:

  • Make sure you understand what it is.
    • A severance package is not an unlimited money stream after you leave a position. It’s usually a lump sum of cash, equivalent to about three to six months of salary. The severance package may also address other compensation like stock option vesting, outplacement assistance, and vacation time payout.
  • Don’t sign paperwork too fast.
    • Always allow time for your attorney to go over it with you. Your employment attorney may find objectionable provisions which the attorney can negotiate with your employer to remove from the severance agreement.
  • Always leverage your past professional accomplishments.
    • Negotiating a severance package is no different from the rest of the job interview. You’re trying to leverage your experience, accomplishments, and accolades to obtain better pay, benefits, stock options, etc.
  • Set a few hard limits.
    • Know your limits when you’re negotiating pay and benefits. You also have to stick to your guns and not be afraid to turn down an offer if the contract doesn’t meet your expectations.

We Can Help You Determine if You’re Eligible to Receive Severance Pay

Since severance packages likely depend on the language of the severance policy or agreement, it always helps to have an employment lawyer on your side before signing an agreement. It’s the best safeguard against either signing an unfair deal or violating the contract through ignorance. Your employment lawyer can help you comprehend all the stipulations, including NDAs and the rules governing what you can/cannot say when you leave a company.

Contact us today to find out if you’re eligible to receive severance pay, and what you can do if your employer violates your rights. Rowdy Meeks Legal Group LLC represents employees in wage disputes throughout the United States.