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There is no state or federal law that requires an employer to pay Severance to an employee. Rather, any Severance obligations owed by the employer are created by the employer’s own policies and/or a contract with an employee.
This means that, generally, an employer is not required to pay an employee Severance unless there is a company policy in place providing for Severance payments to departed employees and/or unless the employer has promised to pay Severance to the employee in accordance with an Employment Agreement or Separation Agreement.
If the employer has agreed to pay Severance to an employee and fails to do so, this would constitute a Breach of Contract. A failure to honor a promise to pay an employee Severance is actionable under the Wage Payment and Collection Law. This powerful, pro-employee statute is discussed detail in our Website, www.johnagallagher.com.
Finally, sometimes an employer will offer a departing employee Severance even where there is no company policy in place, and even where prior to the employment termination there was no contract between the employer and employee whereby the employer promised Severance to the employee. Often, employers offer such Severance in order to obtain a Release from the employee prohibitting a future lawsuit. You should seek counsel if your employer offers you Severance upon the termination of your employment.
Although the law is not abundantly clear on this point, our firm takes the position that Severance payments do not count as wages, and therefore do not preclude or in any way inhibit an employee's right to Unemployment Compensation.
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