I receive many inquiries from recently terminated employees asking about their right to severance pay. In the states where I practice, Pennsylvania and New Jersey, there is no common law right to severance pay. However, although relatively rare, there are some employees who have a contractual right to severance. Contractual severance provisions, for example, may exist as part of an employment contract, a union collective bargaining agreement, or an employer’s workforce reduction policy. For those employees without a contractual right to severance, you still may have an opportunity to receive severance. Many employers will offer severance packages to a separated employee in exchange for a release of claims and/or the agreement to post-employment restrictions, such as a non-solicitation agreement. Employers generally do not offer these packages out of the kindness of their hearts. The avoidance of a legal claim and the protection of the employer’s business from competition are valuable to an employer. Additionally, paying severance to separated employees is a morale booster for the employees who remain with the company. Keep this in mind when you evaluate an offer of severance. Make sure you are receiving fair value for the release and post-employment restrictions in the agreement. Don’t treat severance as a gift. Treat it as a contract and negotiate it as you would any other contract.
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