Severance Pay Laws- An Overview of States That Mandate Compensation Upon Employee Termination

Do any states require severance pay?

Severance pay, also known as severance compensation, is a form of payment given to employees when they are terminated from their jobs. While it is not a requirement in all states, there are several U.S. states that have specific laws mandating severance pay under certain circumstances. Understanding these laws is crucial for both employers and employees to ensure compliance and fair treatment in the workplace.

California: A Mandatory Severance Pay Law

California is one of the few states in the United States that requires employers to provide severance pay to terminated employees. Under California law, employers with 25 or more employees must offer severance pay if the employee is terminated without cause or due to a layoff. The amount of severance pay is typically one week of pay for each year of service, up to a maximum of 52 weeks. However, employers are not required to provide severance pay if they offer another form of compensation, such as continued health insurance coverage or a severance agreement.

New York: Statutory Severance Pay for Certain Employees

In New York, severance pay is not a universal requirement, but it is provided under certain circumstances. For employees who are terminated due to a layoff or plant closing, New York law requires employers with 50 or more employees to provide severance pay. The amount of severance pay is based on the employee’s length of service, with a minimum of 6 weeks’ pay for employees with at least 5 years of service. Employers are also required to provide notice of the layoff or plant closing to affected employees.

Other States with Severance Pay Requirements

While California and New York have specific severance pay laws, other states have provisions that may require severance pay in certain situations. For example:

– Illinois: Employers with 50 or more employees must provide severance pay to employees who are terminated due to a layoff or plant closing.
– New Jersey: Employers with 25 or more employees must provide severance pay to employees who are terminated due to a layoff or plant closing, with a minimum of 6 weeks’ pay for employees with at least 5 years of service.
– Ohio: Employers with 50 or more employees must provide severance pay to employees who are terminated due to a layoff or plant closing, with a minimum of 6 weeks’ pay for employees with at least 5 years of service.

Conclusion

While not all states require severance pay, it is essential for employers and employees to be aware of the laws in their respective states. Compliance with these laws ensures fair treatment and can help prevent legal disputes. Employers should consult with legal professionals to understand their obligations and employees should be informed about their rights regarding severance pay.