Severance Pay

Maryland, Northern Virginia, and Washington D.C. Severance Pay Attorneys

Our severance pay attorneys help employees throughout Maryland, Washington DC and Northern Virginia with severance agreement and severance package issues.

What Is Severance Pay?

Severance pay is generally a payment of money, and in some cases other benefits, that the employer gives the employee upon discharge or termination in order to "tide" him over for a brief period of time, while he/she is seeking new employment, or simply in appreciation of the employee's past service.

Must an Employer Provide Severance Pay?

The answer is "no" in the majority of cases. Unless an employee has a contract for it, the law does not require the employer to offer a discharged employee a severance package, however many employers do provide them as a gesture of gratitude for valued service or as a tool to protect themselves from litigation when an employee is forced to leave his/her job.
Note: There are usually strings attached to severance. The offer of severance pay is generally made in return for the employee signing a release document giving up his/her right to sue the employer for wrongful termination or any other type of claim e.g. discrimination, that may have arisen during the employment or is associated with the separation, known or unknown to the employee at the time.

Cases Where Employer may be Required to Provide Severance

While no laws compel employers to provide severance packages, there may be times where the employer is obligated to, or it is in its best interest to provide for severance.

• The employee was promised a package, either through an employee handbook or through an oral promise
• The employee has a written contract that says he/she will receive severance
• There is an established practice or policy of providing severance packages to employees discharged under similar circumstances

What Is Normally Included in a Severance Package?

Some severance packages are only for a certain amount of pay (possibly one month's salary). More extensive severance packages contain more than just pay, and are usually offered to longtime employees or those at the executive levels of the employer e.g. the CEO. These severance packages often include a variety of benefits, from severance pay to health insurance benefits. If you are at the top of the professional ranks, the package may include other perks, but keep in mind in many cases these agreements are made in order to entice the person to join the company in the first place, and are therefore not tied to the circumstances of the severance.

Examples of items usually made a part of a typical severance agreement

• A "Cash" Payment

  An employer will almost always provide some kind of cash payment if it offers a severance package at all. The amount of the payment can vary greatly, but it is usually calculated based on how long the employee worked for the company. For example, two weeks' salary for every year worked.

• Insurance Benefits

  There are laws, both state and federal, that require an employer to offer to continue health insurance benefits when an employee is forced to leave the job. The most well known of these laws is the Consolidated Omnibus Budget Reconciliation Act (COBRA). Under COBRA, an employee is given the option of keeping his employer's health coverage but now has to pay for the premiums. COBRA generally applies to group health plans maintained by employers with 20 or more employees in the prior year. It applies to plans in the private sector and those sponsored by state and local governments. The law does not, however, apply to plans sponsored by the Federal government and certain church- related organizations. The employer is required to notify an employee of their right to elect COBRA upon separation, and the employee has 60 days to make such election. Coverage can be provided from a period of anywhere from 18 to 36 months and extends to dependents such as spouses or minor children. Again, the extension of payment for insurance benefits is always something that parties can attempt to negotiate in a severance package.

• References and Nondisparagement Agreements

  Employers and employees may wish to avoid the potential of "bad press" down the line. It is possible to work with an employer to come up with a letter of reference that the employee finds satisfactory for him/her to use in seeking out other employment. This letter of reference can be included in the severance package. In any event, it is generally unwise for an employer to say anything unfavorable about an employee due to the fact that a case for libel or slander might result. Employers also have an interest in not having a former employee "bad-mouth" the company or its products or services, so they may seek an agreement from the employee to avoid unflattering comments as well.

• Outplacement Services

  Sometimes employers will provide employees with services, such as career counseling and job training in order to help them find a new job. These services are called outplacement services and can be offered as part of a severance package.

• A Promise to Not Contest Unemployment Claims

  Depending on how the employee left the job and some other factors, he/she may be eligible to receive unemployment benefits. If an employee files a claim for unemployment benefits, the former employer can contest the claim. It is possible to get a promise from the former employer to not contest this claim for unemployment benefits included in a severance package.

Eligibility for Unemployment Benefits

Acceptance of severance

In many cases, acceptance of severance will act as an offset to unemployment or delay the onset of eligibility for unemployment benefits.

If you need the help of an experienced employment discrimination lawyer, personal injury or insurance attorney in Maryland, Washington DC or Northern Virginia, please contact the Law Offices of Stuart L. Plotnick, LLC in Rockville, Maryland