When you sign an employment contract and start a new job, you are probably thinking about how you will spend your first paycheck. If you are the sort to think about long-term plans when there is a new development, then you might even be looking forward to the raises you will receive in the future and the long-term financial goals that the new job will help you achieve. You are probably not thinking about the extent to which your employer will leave you high and dry if the company abruptly terminates your position through no fault of your own. Before you start a new job, you should read all the terms of the employment agreement, including provisions for severance pay. If your employment contract does not say anything about severance pay, it is worthwhile to ask about it before you sign the contract. Likewise, if your employee terminates your position for reasons unrelated to misconduct or poor performance, you should not sign a separation agreement that waives your right to file a lawsuit but does not include a severance package. To find out more about severance pay arrangements determined at the beginning or end of your employment period, contact the Minneapolis severance pay dispute lawyers at HKM Attorneys LLP.
What Severance Pay is Not
Severance pay is money paid by an employer to an employee that the company has laid off before the end of the employee’s contract period even though the employee’s job performance does not warrant termination of employment. The amount of money offered in a severance package varies, but it is often equal to at least one month’s salary. From an employee’s perspective, a severance package often feels like a consolation prize, to soften the blow of losing one’s job unexpectedly despite having fulfilled one’s job duties successfully. It gives the employee some time to find a new job before having their income interrupted. There are some common misconceptions about severance pay, though.
Severance pay is not the same as accrued sick leave or vacation pay. If your contract provides for those benefits, your employer must pay them to you when terminating your employment, with or without a severance package.
Severance pay is not a given. Federal and state law do not require employers to offer severance packages. Whether you receive severance pay depends, in part, on your employment contract.
Minnesota Law Does Not Require Severance Pay, but Some Employment Contracts Do
Employment contracts include details about all the kinds of compensation the employee will receive in exchange for their work, including salary, retirement funds, health insurance benefits, and paid leave. If the employer intends to provide severance pay in the event of a layoff, they should specify this in the contract, including the amount of severance pay the employee will receive. If your employment contract promises severance pay, but your employer does not pay it after a layoff, contact a Minneapolis severance pay dispute lawyer. Note that employers are not required to pay the severance package if the reason for termination of employment is misconduct by the employee. Likewise, an employment lawyer can help you if your employer has unjustly terminated your employment.
Separation Agreements and the Opportunity Cost of Severance Pay
In the event of a layoff, employers sometimes ask employees to sign a separation agreement. By signing the agreement, the employee promises not to sue the employer for unlawful termination of employment. The separation agreement might include a severance package, even if your employment contract did not include one, but there is no legal requirement for this at the federal or state level. If the employment contract included a promise of severance pay, the separation agreement must honor it. If your employer asks you to sign a separation agreement, with or without a severance package, you should review it with a lawyer before signing it. If your employer does not give you enough time to read the agreement carefully and meet with a lawyer, that is all the more reason not to sign it.
If the separation agreement requires you to waive your right to sue your employer for unjustly terminating your employment, this provision is legally enforceable. Minnesota law does not, however, allow separation agreements that require laid off employees to waive the right to collect unemployment benefits. Even if the separation agreement includes severance pay, you still have the right to collect unemployment benefits after the period of severance pay ends, if you have not started a new job by then.
Can You Sue Your Employer After a Layoff, and Should You?
Waiving the right to settle a dispute in court is not a decision to be taken lightly. Should you accept a severance package even if it means that you lose the right to sue your employer for terminating your employment? Is the severance package generous enough to make up for the money you could get from a settlement or judgment in a lawsuit? It depends on a variety of factors, not least among them the fact that lawsuits are time-consuming and stressful. You might get more money if you sue, but only if the judge takes your side against your former employer’s, and years could go by before you see the money. If the severance package is equal to several months of your salary, it is probably better to accept the severance pay and start looking for a new job, knowing that your relationship with your former employer ended on good terms, and your former employer will probably provide a good reference for your next job. If your employer wants you to sign a separation agreement that does not include severance pay, though, you and your employer should weigh your options before you sign.
Another factor to consider is why your employer terminated your job. If it was discrimination masquerading as a corporate restructuring, then you should not give up your right to sue. Likewise, if your employment contract includes a force majeure clause, it may be difficult to win a lawsuit if you were laid off after a disaster that affected the national or local economy.
Contact a Minneapolis Severance Pay Dispute Lawyer
A Minneapolis severance pay dispute lawyer can help you decide whether the separation agreement your employer wants you to sign is fair. Contact the Minneapolis severance pay dispute lawyers at HKM Employment Attorneys LLP to set up a consultation.