In most states, employers are not required by law to provide severance packages to terminated or fired employees. However, to avoid a possible lawsuit, many choose to provide one.
There are some states that have laws requiring an employer to provide a package if the termination is due to a large company layoff or a facility closing.
Some employers will offer a package because they feel it is the right gesture for having to end an employee’s job. It’s possible they truly appreciate the employee’s hard work and loyalty, but have to let them go for various financial reasons.
Some advice would be to keep whatever you do within the company consistent. Many companies may choose to have a policy saying the severance pay amount depends on how long the individual has been with the company. This can save on unnecessary discrimination cases that may occur.
There are a few cases in discrimination lawsuits where a company will be legally required to pay the employee. Some of these are for the following reasons:
- There is a promise in the employee handbook of severance packages.
- There is a promise in a written employee contract.
- There was an oral promise made.
- There is a history within the company of past severance packages being distributed.
Below are some other services employers can offer a terminated employee besides (or in addition to) a severance package:
- Letters of recommendation
- Outplacement services such as career counseling, resume writing, job leads and practice interviews
- Not contesting unemployment benefits a former employer requests
Whatever you choose to do as an employer, being honest and forthright with the employee is necessary.