Understanding How Employment Severance Packages Work

Published: 14th October 2008
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Most states, including California, do not require the employer to give employees severance pay when they leave the company. This is unless there is employment severance packages indicated in the contract the employee signed upon being hired, among other situations. Here are a few of those situations when you can consult a lawyer regarding your severance pay:

• When it clearly says so in a written contract with the employer

• When it is indicated in your company handbook that employees are entitled to severance pay (if so, check if there are requirements for it, like number of years employed, etc.)

• When the company has a long history of giving severance pay to employees in the same position as yours

• When your boss makes a verbal promise that you will get severance pay

Employment severance packages may not include just money but also other benefits like:

• References - in most cases, you'll need this to be able to secure employment in other companies

• Insurance benefits - you may choose to continue the health insurance that you enjoyed while working (provided that you pay for the premiums yourself), but some employers do include covering your health insurance for a specified period of time after your employment with them.

• No contest in unemployment compensation - it may be part of your severance package that your employer will not contest your claim to unemployment compensation so that it will be approved faster.

What about my final pay?

California state laws require employers to give employees their final pay within 72 hours of his/her resignation. This is provided that the employee did not sign a contract with the employer that he/she will render a set number of days as advanced notice of his/her resignation. However, if the employee is fired, the employer is required to pay his/her final wage immediately.

Unlike some states, California state laws also do not require employers to pay all earned but unused vacation pay. Employers who willfully do not pay the wages that are due to an employee may be charged to pay continuing wages as a penalty. This is equal to up to 30 days' worth of the employee's wages.

The state laws of California participate in joint federal unemployment insurance. This is to soften the economic blow on people who become unemployed, provided that it is not through their own fault that they became unemployed. Here are the reasons for disqualification for unemployment insurance:

• Voluntary resignation without any good cause

• Terminated/discharged for willful misconduct

• Refusal of suitable employment

If you are employer, you are not required by some states to give your employees severance benefits, but it may be good to consider offering some. Severance benefits will usually cushion the blow when you let an employee go from the company. After paying an employee's severance pay, you may want to ask them to sign a form that releases you from future potential lawsuits. Providing for severance benefits is both a sign of goodwill and a legal security for employers. It is a positive, supportive gesture towards employees so that he/she can partially supplement his/her income while looking for a different job.

If you are an employee and you think that you are entitled to severance benefits because of the reasons stated early on in this article, it would be best to consult with an attorney about how to best handle this case.

For employment issues such as severance packages, you can confer with our expert Los Angeles attorneys. To avail of our free case evaluation, you can visit our website.

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