Each week, our office receives dozens of calls from prospective clients. And, virtually every week, at least one of these callers, after explaining that they were terminated without warning, asks: “doesn’t my employer have to pay me some severance?” And, our answer is always the same, “unless you are contractually entitled to a severance payment, you are not entitled to one, regardless of the circumstances surrounding your severance.”
In the United States, unlike in other industrialized countries, an employer has absolutely no obligation to pay employees a severance at the time of termination, even if the employee’s termination is unrelated to poor performance, or is on account of some type of lay-off or reorganization. While employees are entitled to receive pay for all of the days that they worked prior to their termination, as well as compensation for accrued but unused vacation time, in most instances, paying severance is strictly optional.
Cases Where Severance Applies
What are those – albeit rare – cases in which an employee is entitled to severance? Frankly, there are really only three instances in which an employee is entitled to severance. First, if the employee has a written contract that provides for severance at the time of termination, she may be entitled to a payment if the circumstances outlined in the contract are met. Second, if a company employs more than 75 employees, and has a layoff of 50% or more of its employees within a 30 day period, there may be an entitlement to severance under either California law or the federal WARN Act. Third, if the employee is a union member, and the collective bargaining agreement has a provision for the payment of severance, there may be an entitlement to such a payment.
But, aside from those three circumstances, as we always tell our callers, our laws do not require employers to pay severance.