Q. Because of a downturn in our business, we are thinking of eliminating a position. Are we required to offer severance pay to the terminated employee?
A. Generally, no. There is no law that requires an employer to pay severance to a terminated employee. However, if you have a policy that provides that your company will pay severance to an employee who is terminated without cause or when his or her position is eliminated, then you may be contractually obligated to pay severance.
In addition, an employer may choose to offer severance to a terminated employee in exchange for a release of claims.
If you want to obtain a release of claims from the terminated employee, you should consult with counsel to ensure that you comply with Minnesota and federal laws for a valid and enforceable release.