When faced with a layoff or termination, one of the most frequently asked questions is whether an employee is eligible for severance. Under Florida law, employers are not obligated to provide severance pay to their employees. If you have questions about severance, a qualified employment attorney can help advise you of your rights.
It’s essential to understand the difference between earned wages and severance pay. Earned wages refer to the amount an employee has earned for work performed. Regardless of whether an employee resigns or is terminated, their employer must compensate them for all earned wages. The employee is entitled to receive a final paycheck, including earned commissions and guaranteed bonuses, on the next scheduled payday following the end of their employment.
On the other hand, severance pay is a voluntary benefit offered by an employer or as per company policy. Typically, the amount of severance pay is determined based on the length of the employee’s service. It’s a best practice for employers to establish the terms of any severance payment through a severance agreement.
Florida law does not grant employees an automatic right to severance pay. If you’re uncertain about your entitlement to severance, the first place to check is your employment agreement or union agreement as well as under any applicable company policies. If such an agreement or policy specifies that you are entitled to severance in the event of termination, it’s crucial to review the terms carefully, as eligibility may vary depending on the reason for termination. For example, severance pay is often unavailable in cases of termination for cause such as a termination for wrongdoing by the employee.
Severance pay may also be required under company policy. Businesses may offer severance pay in situations involving a large number of layoffs to minimize bad publicity for the company, or make the company more competitive in the job market, and to have an employee sign a severance agreement waiving any claims the employee may have against the company.
In most circumstances, the employee will be required to sign a general release of all claims against the employer in order to receive the offered severance package. By signing a release of claims, the employee is giving up the right to sue the employer. The release generally only covers events that occurred up to the date of the layoff or termination. However, the scope of the release can be as broad (i.e., where the employee releases all claims relating to his employment) or as narrow (i.e., where the employee waives the right to sue the employer for specific claims) as the parties want.
In addition to a release of claims, the employee often must agree to certain restrictive covenants. A restrictive covenant is a contract provision that prohibits an employee from engaging in certain activities after the layoff or termination. The most common restrictive covenants in a severance agreement include:
In Florida, where there is no automatic right to severance, negotiation can be a key factor to receiving a severance payment. If you have a claim against your employer, an experienced employment attorney can help you understand how to leverage a severance settlement. Employers, too, can benefit from legal guidance in structuring employment agreements to mitigate future liability and requiring employees to sign a severance agreement waiving any claims against the company in exchange for a severance payment For more guidance on severance, feel free to reach out to a member of our employment team.