Are employees entitled to severance pay?

Most employees are not entitled to ANY severance pay.

As the US Department of Labor explains,

Severance pay is often granted to employees upon termination of employment. It is usually based on length of employment for which an employee is eligible upon termination. There is no requirement in the Fair Labor Standards Act (FLSA) for severance pay. Severance pay is a matter of agreement between an employer and an employee (or the employee’s representative).

For example, an employee may be entitled to severance under the terms of their employment agreement. This is unusual and usually reserved for highly paid employees such as senior managers.

Severance pay is also commonly provided in collective bargaining agreements when workplaces are unionized.

A small number of states and territories also require severance pay to be offered to certain employees.

What is illegal employment discrimination?

Title VII of the federal Civil Rights Act of 1964 prohibits employment discrimination based on race, color, religion, sex, and national origin.

As the EEOC explains,
An employer may not take into account a person’s race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information when making decisions about discipline or discharge. For example, if two employees commit a similar offense, an employer many not discipline them differently because of their race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information.
When deciding which employees will be laid off, an employer may not choose the oldest workers because of their age.

Severance Discrimination

Even though federal law doesn’t require employers to offer severance to fired employees, the law does require that all employees be treated equitably when it comes to severance.

That does not mean that all workers must get the same amount of money. It’s common for workers who have been with a company longer or who are in more senior positions to get more.

However, as SHRM explains,

Employers providing severance pay must be consistent in the treatment of whom they award severance pay to. For example, employers may not discriminate against any employee age 40 or older with respect to compensation, terms, conditions or privileges of employment because of age. Age may not be used as a basis for limiting, segregating or classifying an employee in any way that deprives the employee of employment opportunities or that otherwise adversely affects employment status. Similarly, discrimination based on race, gender, ethnicity/national origin, disability, family status and any other of the protected classes specified in Title VII of the Civil Rights Act is strictly prohibited.

How much severance pay should I get?

Just as there are no federal laws that require employers to pay severance, there are no federal laws that require the payment of any specific amount to employees who do get severance.

If an employee has an employment contract that deals with severance, the amount will normally be stated there.

According to CNBC,

it’s typical to get one to two weeks of pay for each year of employment. So if you worked for 10 years, you might receive 10 weeks of severance.

Some companies may offer as much as one month of severance for every year of employment.

While some companies have rigid formulas about how much severance they pay, others are more flexible. As Investopedia suggests, when thinking about how much severance to ask for you could consider the following:

• How well did you perform and how well is it documented? The better your evaluations and the more popular you are, the more likely that an employer will carve out more severance pay.
• What triggered your dismissal? If the circumstances behind your termination are out of your company’s hands—downsizing as the result of a merger or the axing of an obsolete division—terms are likely to be more generous.
• Has your company been lax about tracking your performance? Your company is likely to weigh its legal vulnerability. If you were fired for under-performance, you might gain leverage if your evaluations are unclear or seem to point to good work.

Can I negotiate to get better severance pay?

Whether you can get more severance pay than you were initially offered depends on your circumstances.

Severance agreements almost always include a waiver of any claims you may have against your employer for wrongful termination . Thus, it’s important to think very carefully – and perhaps consult a lawyer – before you sign such an agreement if you feel you have a discrimination claim.

The amount you could get in an award or settlement based on a discrimination claim could be much more than you would get in severance. However, this potential upside needs to be weighed against the uncertainty of winning. Also, that award or settlement might come years in the future, and you might be counting on your severance check to pay next month’s mortgage.

If you do have a potential discrimination claim, that can give you leverage to ask for more severance. The company probably doesn’t want to deal with the hassle, expense, and bad publicity of a lawsuit.

However, if people are being fired en masse, as during the pandemic, then there may be less room to negotiate. As CNBC notes,

Typically, companies pay something in exchange for you not making a wrongful-termination claim against the company. However, in this environment, where people are getting laid off left and right, wrongful terminations are not nearly as big of a concern for businesses. That could make it tough to collect money that you think should be coming your way.

It is rarely a bad idea to ask for more severance pay than you’re initially offered. Usually, the worst the employer will do is say “no.” It’s very unusual for an employer to withdraw or reduce a severance offer if an employee asks for more.

If you feel uncomfortable or intimidated about negotiating for more severance pay, a lawyer may be able to help you with this.

Severance at Amazon

According to The Atlantic,

The amount [of severance] full-time [hourly] employees get offered ranges from $2,000 to $5,000, and depends on how long they have been at the company; if they take the money, they agree to never work for Amazon again.

According to CNBC,
The company offers $2,000 to employees who have been at the company one year, and the offer increases by $1,000 per year of tenure, maxing out at $5,000.
This program, which is called Pay to Quit, was first created by online shoe retailer Zappos, which Amazon bought in 2009. Zappos only extended the offer to its newest employees, within the first few weeks of employment, and the “quitting bonus” was set at $1,000.
Do you need help with your Amazon severance agreement?

If you’ve been offered a severance agreement by Amazon and want help negotiating it, call attorney Cj Rosenbaum at 212-256-1109, text 212-256-8492, or email CJ@AmazonSellersLawyer.com. You can also submit a summary of your situation online .