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Must we offer severance payments?

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in Firing,Human Resources

Q. It looks like it will be necessary for our company to lay off several employees. Can you tell me whether we are required to pay severance? If so, how much?

A.
Neither federal nor Minnesota laws require an employer to provide severance pay to employees. An obligation to pay severance arises only if it is part of a contract or if it was clearly promised and the employees relied on this promise to their detriment.

Even in the absence of an obligation to pay severance, though, you may wish to consider offering it.

Employers often provide these benefits as part of a separation agreement that often includes a release of any legal claims the departing employee may feel he or she has. This can be an effective way of ensuring that a reduction in force will not trigger legal claims from the departing employees.

There are many legal requirements for a valid release of claims, so I would encourage you to work with your legal counsel in drafting the agreement.

Keep in mind, depending on the size of the layoff, you may have an obligation to provide advance notice of the terminations under the federal Worker Adjustment and Retraining Notification (WARN) Act. This is something you should explore with legal counsel before moving ahead with the terminations.

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