Severance refers to the compensation that some employees receive upon termination of their employment. It is intended to provide financial support to former employees during their search for new employment. However, severance is not always guaranteed to terminated employees.
Severance can include monetary payments, benefits continuation, or other assistance forms. The primary purpose of severance is to help the terminated employee transition to new employment or retirement. Sometimes, severance is also offered as a goodwill gesture to maintain a positive relationship with the terminated employee.
In most cases, severance is not required by law. Employers are generally not obligated to provide severance unless they have agreed to do so in writing. This written agreement can be in the form of an individual employment contract or a collective bargaining agreement with a union. Some jurisdictions may have specific laws governing severance, but these are typically limited in scope.
It is important to note that employers are not required to offer severance to terminated employees for cause, such as misconduct or poor performance. In these situations, the employer may terminate the employee without additional compensation.
Severance in Written Agreements
If an employer chooses to offer severance, it is essential to have a written agreement outlining the terms and conditions of the severance package. This agreement can be part of the initial employment contract or a separate document created at the time of termination.
The written agreement should specify the amount of severance, the method of payment, and any conditions that must be met for the employee to receive the severance. For example, the agreement may require the employee to return all company property or complete a specific project before receiving severance.
A written agreement can help prevent disputes and misunderstandings between the employer and the terminated employee. It also provides a clear record of the employer’s commitment to severance, which can be valuable in legal challenges.
Severance and Release Agreements
When offering severance, employers should consider using a severance and release agreement. This type of agreement requires the terminated employee to sign a document stating that they accept the severance package and, in exchange, agree not to pursue any legal claims against the employer related to their termination.
Severance and release agreements can provide several benefits for the employer and the employee. For the employer, the agreement can help protect against potential lawsuits or other legal actions by the terminated employee. It can also provide a sense of closure and finality to the termination process.
For the employee, signing a severance and release agreement can provide financial security during a difficult time. The agreement can also serve as an acknowledgment of their service to the company and a demonstration of the employer’s commitment to supporting them in their transition to new employment.
Philadelphia Business Lawyers at Sidkoff, Pincus & Green P.C. Can Help Your Business
When terminating an employee, there is much to consider, including whether to provide severance. Speak with our Philadelphia business lawyers at Sidkoff, Pincus & Green P.C. to learn more. Call us at 215-574-0600 or contact us online to schedule a consultation. Located in Philadelphia, we proudly serve clients in Pennsylvania and New Jersey.