Do Companies Have to Pay Severance?
If you face termination from your job or will soon leave your employer for personal or other reasons, you may be nervous about your finances. Severance pay could provide much-needed financial breathing room, but do companies have to pay severance?
When available, severance pay can help you pay your bills and other expenses while transitioning to a new phase in your professional and personal life. But when your employer wrongfully withholds severance pay from you, it may be necessary to seek legal help in securing severance from your employer.
What Is Severance Pay?
Before answering the question, “Do companies have to pay severance?” it is helpful to understand what severance pay is. “Severance” or “severance pay” refers to financial compensation your employer provides when your employment ends, either by involuntary termination or voluntary resignation.
In addition to being paid at the end of employment, some other characteristics of severance pay include the following:
Severance Is Agreed to in Advance
You and your employer will almost always agree to severance before you officially leave the company. For example, you may be:
- Promised severance during the initial contract negotiations before your hire
- Awarded severance upon reaching a longevity milestone with your employer
- Granted severance pay as part of a promotion to senior management
- Given severance as part of an agreement to resign or leave the company
If you and your employer have not discussed severance before your exit from the company, it is unlikely you will receive severance. It is highly uncommon for an employer to agree to pay severance after you have already left your employment with them.
Severance Is Paid in One Lump Sum
Severance pay is typically given to you in one lump sum payment. Your employer can provide severance on your last day, on what would have been your next scheduled payday, or at some other time upon which you and your employer agree.
It is rare for severance to be paid periodically or over several months.
Severance Is Meant to Help You Transition to a New Phase
The amount of money you receive as part of any severance package is designed primarily to help you alleviate financial pressure while finding a new way of supporting yourself.
When used wisely, your severance can keep you from feeling pressured to accept a new job offer that is not well-suited to you simply because you have bills to pay.
Severance Pay Is Unique to You and Your Employer
Do companies have to give severance pay? Do companies always offer severance? The answer to both questions is no. Any severance you receive would be whatever you can negotiate with your employer. While this does give you and your employer flexibility to craft a plan that works for both of you, it does mean that your employer is not legally required (in most circumstances) to offer you any severance package.
What is the most common severance package? A typical severance package would include several weeks’ worth of salary, with more severance being given to those who have worked for the company longer.
Other benefits, like health insurance for a specific period or assistance finding other employment, may also be part of a severance agreement.
Severance May Not Be Available if You Quit
You may ask, “Do I get severance if I quit?” What triggers severance? An employment agreement will usually specify the conditions or circumstances which would entitle you to receive severance.
Most often, when there is an agreement beforehand, an involuntary termination of your employment would require your employer to pay severance to you. This termination would include if you choose to resign instead of being terminated.
However, you may not be entitled to any severance if you voluntarily quit your employment. Most severance agreements only cover situations where your work abruptly ends for reasons beyond your control.
Do Companies Have to Give Severance Pay?
Generally, there is no absolute right to severance pay in Florida. Like most other states, Florida is an “at-will employment” state, meaning that you or your employer may terminate your employment anytime and without cause.
Florida’s labor laws do not require most employers to offer or pay severance to employees at the end of their employment.
However, there are specific circumstances where an employer must give severance pay. Some situations that could require your employer to pay severance include:
Your Employment Contract Provides for Severance
If you have an employment contract that provides explicitly for severance, your employer will be required to honor that provision. These provisions for severance pay are featured in contracts for senior management positions or positions requiring specialized knowledge or skill.
Suppose you and your recruiter discuss severance pay as part of employment negotiations. In that case, it is always advisable to ensure your employment contract spells out the terms to which you and your recruiter agreed.
Suppose your contract has a provision allowing for severance pay that differs from what you and your recruiter discussed. In that case, courts will often enforce the severance pay provision found in the contract.
An Implicit Promise Is Made to You
Employers might make implicit promises to employees throughout the employment relationship. These implicit promises are verbal only and are not memorialized in writing, so they are difficult to prove. However, in some cases, your employer may have to pay you severance because of an implied promise to do so.
For example, suppose your company announces that layoffs are coming, and some employees, including yourself, may be left without a job. In making this announcement, senior management says, “But do not worry, we will take care of those who are laid off because we are a family, and we support one another.” This could be an enforceable, implied promise for severance.
In cases of implied promises, not only must the terms of the pledge be clear and reasonable, but you typically must show that you acted in reasonable reliance on the promise. Using the example above, reasonable reliance might be foregoing some more immediate offers of employment because you believed you would be paid severance.
Your Employer Acted in an Unlawful or Egregious Manner
Finally, your employer may be required to pay you severance if they acted shockingly or if your employment was terminated for an unlawful reason.
In this case, a court or the terms of a settlement would compel your employer to provide you with severance. The terms of the court’s order or your agreement would state how much severance you would receive.
For example, suppose your employer terminates you for a discriminatory reason. Part of the damages you could receive through a lawsuit or settlement include severance pay.
Read Any Severance Pay Agreement Carefully
Having your severance agreement in writing and signed by yourself and your employer is straightforward to enforce and challenging for the employer to evade. But if your severance package is tied to other provisions, the courts will also implement those provisions in most cases.
For example, if your employment contract provides you with $50,000 severance pay upon your termination, read the agreement carefully to ensure you are not unwittingly giving up substantial legal rights in exchange for severance pay.
When in doubt, an employment rights attorney can review your contract before you sign so that you enter the employment relationship with open eyes.
Factors that Affect Severance Pay
Any severance you receive or are guaranteed is unique to you and your employer. Do companies have to pay severance? No, they do not. Nor must they provide severance of a certain amount. Employers and employees can negotiate a severance amount they believe is fair and in their best interests.
You may be able to secure a higher amount of severance from your employer if you:
Are you a High-Level Executive or Senior Manager
The higher up in the management ladder you are, the more leverage you have to demand a generous severance package as part of your overall compensation package. Employers will realize that the benefits of securing your talents as a senior manager outweigh the potential cost to them if they must pay you severance.
Have Specialized Knowledge or Skills
Similarly, employers who want to attract individuals with specialized skills, scientific knowledge, or other unique attributes will often agree to pay severance to entice these people to work for them. Typically, the more valuable and particular the skill, the more considerable the amount of severance you can expect to receive.
Have Been with Your Company for a Long Time
Employees with significant institutional knowledge of their employers or considerable on-the-job experience can be just as valuable as employees with specialized skills or training. As a result, employers are incentivized to retain these employees and may do so by offering them a generous severance package.
What if You Were Supposed to Receive Severance Pay but Didn’t?
There may be several reasons why you feel you are entitled to severance pay. Your employment contract may expressly state that you are entitled to severance pay if your employment is terminated or your employment contract is not renewed.
Your expectation may come from an oral promise made by a senior manager or your human resources personnel. Or perhaps someone on your management team heavily implied that you would receive some severance if you were laid off or quit your job.
Whatever your situation, if you believe you should have received severance, you should speak with a Florida severance lawyer as soon as possible. Your attorney can:
- Review and analyze your employment contract
- Interview other employees and managers about any implied severance promises
- Investigate the circumstances surrounding your termination
- Negotiate a settlement with your employer for severance withheld or denied
- Litigate your legal rights in court if a negotiated settlement is not possible
If your employer is unwilling to honor their commitment to pay you severance voluntarily, pursuing your legal rights with an attorney’s help may be the most effective way to obtain the severance you are owed.
When to Speak to a Lawyer
The laws governing employment contracts, specifically severance agreements, can be challenging to understand. For this reason, if you are unsure about your right to severance pay or believe you were wrongfully denied severance pay, contact Wenzel Fenton Cabassa P.A. for immediate help.
Wenzel Fenton Cabassa P.A. has been looking out for workers’ rights for decades. We fight for you, the employee, and work to protect your rights in the face of companies like your employer.
Do not delay and risk not recovering severance pay. Call our office today for a consultation.