Individuals often ask me if they are entitled to severance benefits after being terminated. Severance benefits are a lump sump payment to the employee which usually require the employee to sign an agreement waiving all potential legal claims against the company. Illinois law does not require employers to pay severance to terminated employees. However, there are some employees legally entitled to severance pay.
Contracts that Guarantee Severance
The exception to this general rule is when the company has contractually agreed to provide severance if the employee is terminated. There are two common situations where employers offer these types of employment agreements. First, these types of contracts are sometimes provided to executive-level employees. The promise of future severance may help entice an employee to join the new company, or convince an existing employee to remain with the company.
Second, these types of contracts are common when a company is in the process of merging with a bigger company. In these situations, employees for the company being bought-out are concerned (often rightly so) they will lose their job in the merger. To ensure a stable transition, the acquiring company will offer employees of the soon-to-be-acquired company a contract guaranteeing severance in the event the employee is terminated. Thus, the employees have an assurance that their job is safe, and in the event of termination, they still will be provided compensation.
Companies are often still willing to pay severance benefits for a variety of reasons. Companies may provide severance benefits as a recognition of service to the company. For instance, some companies have a general policy of giving one week of severance for each year of service. Employers may also provide severance partly because they are concerned the employee may sue the company. To prevent any future litigation, the employer agrees to pay the employee a lump sum payment in exchange for the employee waiving all claims against the company.
Even if the company does not offer any type of severance, a terminated employee may still be entitled to unemployment benefits to ease the burden of losing his or her job. It is important to note that even if you are paid severance, you generally are still equally entitled to unemployment benefits, and the severance payments do not affect your unemployment benefit amount.
If you have been laid off and are presented with a severance agreement (or think you may be entitled to one), it is highly advisable to seek a qualified employment attorney to review your situation. Unfortunately, I have reviewed too many cases where an individual has strong claims against an employer, but is unable to pursue them due to prematurely signing a severance agreement. Contact us today if you are in need of employment advice.