Companies are in the business of making money. As such, they sometimes have to downsize to remain profitable. There are other cases in which a company may align itself with a new investor who wants to take the business in a different direction. It's in instances like these that you may be doing everything you should, yet you're still let go. Some employers who unexpectedly lay off workers may offer them severance pay to cushion the blow.
If there's one thing you should know about severance pay, it's that it's not guaranteed. You're not entitled to it merely as a goodwill gesture for being laid off.
There's a federal law on the books called the Worker Adjustment and Retraining Notification (WARN) Act. It's under this piece of legislation that all employers with more than 100 workers are required to give their employees at least 60 days' notice of their closing before laying workers off. Workers may be entitled to severance pay from their employer if they fail to receive this much notice.
Fired employees may receive severance pay at their employer's discretion even though they're not required to provide it under existing laws. Businesses will often do this in hopes that employees won't sue them for wrongful termination, discrimination or unpaid wages. Companies often have their workers sign non-disparagement agreements before offering such compensation.
The amount of severance pay that a worker may receive varies. It's usually tied into how long an employee has worked for the company. Standard industry practice is for an employer to pay the equivalent of one to two weeks of pay per year that the employee worked for their company. You may be able to negotiate a severance package to include wages that you would have earned and company-paid health insurance for a post-separation period.
An employee's right to health insurance and retirement benefits is protected under the Employee Retirement Income Security Act of 1974 (ERISA). There are instances in which your right to severance pay may be protected under this piece of federal legislation as well. An ERISA benefits claims litigation attorney here in Washington, D.C., will want to learn more about your job and related benefits before advising you whether to file a lawsuit. If you do end up having to pursue litigation, then your lawyer will be your legal ally throughout the entire claims process.