Are Employers Legally Obligated to Offer a Severance?

Upon termination, companies will frequently provide severance packages (also known also “termination pay” or “severance pay” or “separation pay”) so that the former employee may sustain his or herself for a period after separation with the company. The questions many employees have though is this: “are employers legally obligated to offer a severance?”

This is the general rule of thumb in California: no, employers are not obligated to provide you a severance upon termination except for particular instances that are outlined in the law. Some of the exceptions can be found below.

You employer is obligated to provide you a severance if:

1)      Severance pay is outlined in the employee policies and procedures. If your employee handbook indicates that every employee upon separation is entitled to severance compensation, you may have the right to recover those wages.

2)      A severance package is mandated by some sort of contract between the employee and employer during the course of the employment.

3)      A mass layoff occurs then a severance pay is mandated by the W.A.R.N. Act in California. For instance, if a company closes down, they must give their employees at least 60 days- notice of the closure. If such notice is not given, however, the company may be liable to continue paying their employees after the layoff, up to 60 days of payment.

In some instances, employers will provide a former employee with a severance package in exchange for a general release or waiver of claims. In this case, if you accept the severance, you are releasing any and all legal claims you potentially have against the company, as stipulated by California Civil Code 1542.