3 Important Things to Know About Severance Pay

On Behalf of | Jun 11, 2020 | Employment Law

After losing a job, receiving severance pay can be profoundly comforting. It provides a financial safety net that allows an employee to collect a salary without working. However, there are a few important things every person should know about severance pay in Minnesota.

It is not a given

Severance is not a matter of state or federal law. In other words, employees are not entitled to severance, unless their employment contract guarantees it, or unless the employer voluntarily provides it post-termination. The amount of severance an employer offers can also vary widely.

Further, in the absence of specific contract terms, resigning your position lessens the likelihood that you will be offered severance.

There is an agreement

Agreements for severance pay typically state how much will be paid and the conditions for receiving it. For example, if your employment contract guarantees severance, it is usually on the condition that you enter into a noncompete. If you are offered severance upon termination, your severance is likely given in exchange for a release of claims. Such conditions might also include non-disclosure or non-disparagement provisions.

If an employer does not pay severance per the agreement, the employee may pursue legal action to enforce the terms of the contract.

That said, there are specific circumstances under which a person could become eligible for severance without an agreement. The federal Worker Adjustment and Retraining Notification (WARN) Act gives certain employees the right to seek compensation and benefits for 60 days after plant closings or after mass layoffs if an employer who is required to provide a written WARN notification fails to do so.

Parties should prepare to negotiate

Because state and federal laws do not require severance pay, any offer for these benefits can be – and often should be – negotiated. Employers may not offer as much as an employee feels would be fair for what they’re giving up in exchange, or there may be unnecessarily strict requirements for collecting it.

As such, employees offered a severance package should use caution and take the time to consider the offer and negotiate. Employees are also advised to consult an attorney before signing.

Involuntary job loss can be highly upsetting and disruptive for any person. Collecting severance pay can provide valuable peace of mind, so it is something every employee should consider carefully.

Attorney Anne G. Brown routinely reviews severance agreements and advises our clients on the same. You can contact her at 651-738-3433 or by completing our online contact form.