Severance Package Preparations

“To lessen the chance of legal action filed on behalf of former employees”, the Society of Human Resource Management offers an in depth look at the Potential Issues in this article of a severance package. The areas of concern are:

Compliance

While there isn’t a federal law that mandates severance, certain states and territories might.

State/territory laws

Certain laws require severance for plant shutdowns, mass layoffs or for a specific type of employee. SHRM adds, “Under general contract law, ambiguities in a contract are resolved against the drafter, which usually is the employer.”

Equal employment opportunity/anti-discrimination

Employers must be consistent with whom they offer severance and not discriminate.

OWBPA/Age Discrimination

The same goes for not discriminating against those over the age of 40.

Voluntary early retirement plans

“The ADEA, however, does allow employers to offer early retirement incentive programs to employees if employee participation in the program is voluntary and free of coercion and the plan is nondiscriminatory,“ according to SHRM.

ERISA

Under federal law, ERISA governs employee benefit plans.

IRS Code of 1986

Relating to taxation of compensation and benefits, it is also known as IRC (Internal Revenue Code). It is regulated by federal legislation.