• Did you know that you're not legally entitled to severance pay?Closeup of a woman's face surprised by something . image by dpaint from Fotolia.com
  
  Severance pay is compensation in a specified amount as agreed upon between an employer and an involuntarily terminated employee when his employment ends, as in a layoff. According to the U.S. Department of Labor website, the Fair Labor Standards Act (FLSA) has no requirement for severance pay; therefore, employers are not mandated by law to pay it.
  
  

Severance Packages

• The amount of severance pay is calculated based on a terminated employee's length of service and weekly wages or salary. For example, an employee may receive one week's pay for each year of service to the company. Unused vacation and sick time may also be paid separately at the time of separation from the company. According to the Employee Issues website, some states mandate that severance pay must be paid specifically to supplement unemployment benefits or it may count as wages and delay the start of unemployment benefits. A severance package may also include extended health coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA).
  
  

Severance or Bribe?

• Many companies today require employees to sign severance or separation agreements in order to receive their severance pay. Employees who sign these agreements end up waiving any legal rights. They may also be required to sign non-disclosure or non-complete agreements. Employers can legally do this unless there's a breach of contract. It is recommended that employees consult an attorney before signing a severance agreement. Most employers grant a reasonable time period to review and sign an agreement. An employer offering severance pay in exchange for the employee signing away their right to sue may provide negotiating leverage for a more attractive severance package. However, it may result in less or no severance at all if the company rejects the employee's offer. Most employers will stick with their first offers to get employees to waive their legal rights and avoid potential lawsuits.
  
  

Denial of Severance

• There are few regulatory government agencies with which to file a complaint against an employer refusing severance pay, because severance pay is not required by law. However, the Employee Retirement Income Security Act of 1974 (ERISA) may function as a sort of severance pay law. Under ERISA, once an employer voluntarily establishes any type of retirement, health or severance plan they must maintain it fairly, soundly and with accountability. ERISA may apply if an employer denies severance pay required by contract. Employees can contact the federal Employee Benefits Security Administration (EBSA) for assistance. Hiring an attorney will help a displaced employee to present his case and increase the chances EBSA will act on his behalf.