Fired workers not usually entitled to severance
Published 05/01/01

Most workers are employees-at-will, which means that their employment may be terminated, with or without notice and with or without cause, either by themselves or their employer. As a result, upon termination, the worker is not generally entitled to receive severance pay. The worker may also be required to sign a release as to potential claims she could raise against the employer.

If a job candidate has sufficient bargaining power, the worker may be able to negotiate an employment agreement under which the employer will provide severance pay upon termination of the employment relationship. While it is also possible to have a specific term of employment, employers generally want to preserve their managerial right to terminate the employment relationship at their will. However, under certain circumstances an employer may agree to provide a pre-defined severance pay amount in consideration for that termination right.

The worker should carefully review the language used in any such employment agreement since a Court in enforcing the agreement will first look to the specific written terms of the agreement. If the terms are not ambiguous the Court will not consider the worker’s testimony of what she thought the written terms actually meant. Such an employment agreement will often have a provision whereby if the worker leaves on her own, or is terminated for cause, then she is not entitled to severance pay. The agreement would define what was meant by the term cause. For example, if the cause definition included the failure of the worker to meet the performance requirements and needs of the employer, such language gives the employer a great deal of discretion in terminating an employee for cause and therefore not paying a severance package.

Employment agreements may also include provisions for confidentiality, assignment of inventions, and non-competition, all of which are provisions which can seriously impact the worker’s and the employer's business future. It is generally prudent for both the employer and the worker in considering such an employment agreement to seek separate legal counsel to review and explain the ramifications of the employment terms so that they may then, with counsel’s previous guidance, negotiate an agreement or in the alternative decide to walk away from an agreement revealed to be unattractive.

J. Daniel Marr is a director and shareholder at Hamblett & Kerrigan, PA whose legal practice includes counseling businesses and business persons on a variety of legal issues and advocating on their behalf. Attorney Marr is also an adjunct professor at Daniel Webster College where he teaches business law. You can reach Attorney Marr by e-mail at: dmarr@hamker.com

This information is general information and may not reflect the most current legal developments, verdicts or settlements. The information provided should not be relied upon as an indication of the actual state of the law or of future developments. The information contained on the Hamblett & Kerrigan website is for informational purposes only and does not constitute legal advice. If the information referenced may be of legal importance to you, you should consult with an attorney to provide you with legal guidance and opinion as the the effect of the current law upon your situation.