Usually, Virginia employers are not legally required to pay severance, unless there is a contract or severance plan requiring them to.
Severance in Virginia is usually given by an employer if an employee is terminated through no fault of their own and the employer wants to provide some compensation to bridge the gap until the employee can find work elsewhere, or as part of a negotiated severance package if the departing employee has threatened to sue the employer and has valid legal claims.
Contractually-promised severance is usually only provided to select high-level executives of a company under certain circumstances. For example, many executive employment agreements promise a departing executive set severance compensation if the company lets them go through no fault of their own.
Some large companies have severance plans that provide a set amount of severance to a laid-off employee. However, most companies do not have written severance plans, and only provide severance packages at their discretion.
Sometimes companies will offer older workers severance packages to encourage them to take early retirement. Severance packages provided to older workers are heavily scrutinized under the law, and subject to additional legal requirements under the Older Workers Benefits Protection Act (OWBPA), an amendment of the Age Discrimination in Employment Act of 1967 (ADEA). The ADEA protects workers aged 40+ at companies with 20+ employees in the United States from age discrimination.
The Age Discrimination in Employment Act of 1967 (ADEA) protects workers aged 40+ at companies with 20+ employees in the United States. If a company has less than 20 employees, it is not subject to the ADEA, but may be subject to state or local laws protecting older workers from age discrimination.
The ADEA provides older workers with extra legal protections when they are provided with a proposed severance agreement, including extra review time, special legal language in the agreement encouraging the older worker to seek legal counsel to review the agreement, and a seven (7) day time frame to revoke a signed severance agreement.
Virginia employers can follow these best practices for severance agreements:
(1) Treat similarly situated employees the same
(2) Ensure your severance agreement is legally compliant
(3) Give the employee sufficient review time
(4) Conduct your terminations in line with HR best practices
1. Treat Similarly Situated Employees the Same
Similarly situated employees are employees with the same positions. For employees with the same positions, you will want to make sure you are offering the same amounts of severance to avoid any legal liability for claims of favoritism or discrimination. You can offer more severance to executives than you offer to rank and file employees, but remain consistent for each position.
2. Ensure Your Severance Agreement is Legally Compliant
A best practice for ensuring your severance agreement is legally compliant is having an employment lawyer conduct an annual review of the severance agreement template you are using.
If your company has 20+ employees, you are subject to the Age Discrimination in Employment Act (ADEA), which places additional legal requirements on the company if the employee you are terminating is 40 years of age or older.
If you are terminating multiple employees, and have 100+ employees, the terminations may be subject to the WARN Act (Worker Adjustment and Retraining Notification Act of 1988), a federal law that requires you to provide advance notice of large terminations.
3. Give the Employee Sufficient Review Time
While it’s tempting to require a terminated employee to sign a severance agreement quickly, it’s not a best practice and can result in legal liability for your company. Giving the employee sufficient review time will allow for a more amicable termination process, increase goodwill with the departing employee, and it may be legally required if your employee is 40 years of age or older.
Because these requirements can be complicated, getting legal advice on the termination is a best practice to ensure that you are giving the impacted employee sufficient review time.
4. Conduct The Termination In Line with Legal Best Practices
The termination discussion often creates legal liability for employers. Ideally, employers will coordinate with an employment lawyer before the termination discussion takes place, to make sure the termination discussion does not inadvertently create legal liability for the company.
Each termination presents unique factual circumstances and dynamics between the terminated employee and the company, and crafting a roadmap with an employment lawyer will set your company up for a legally compliant termination.
If you are conducting employee terminations in Virginia, and need advice from a competent, experienced employment lawyer, contact Lipp Law today to get the peace of mind you deserve.
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