Implicit severance policy changed without notice after 10+ years of no changes at all.

My company recently had a RIF. I was laid off after 9 years. The company has a 10+ year history of paying a severance of 2 weeks plus 2 weeks for each year of service to anyone in my position. They have never deviated from that formula. There have probably been about 15 layoffs, mostly to clean house, since I started. There is no written severance policy.

I am the first person in my position to be offered a flat 4 week severance package. Does an implicit contract exist? Do I have any recourse at all?

1 answer  |  asked Mar 16, 2009 9:30 PM [EST]  |  applies to Arizona

Answers (1)

Francis Fanning
No promise of severance

The answer to your question is probably no. You must begin with the understanding that an employer is never under an obligation to pay severance unless there is an agreement between employer and employee that it will be paid. Back in the eighties the courts in Arizona began to follow a trend seen in many states at that time. Cases were brought to court in which company handbooks, personnel policies and other such documents were used as evidence of a contractual understanding between the employer and employee. Usually these cases involved termination of employment, but other policies could be found to be part of the employment contract. In 1996 the Arizona legislature passed the Arizona Employment Protection Act, A.R.S. 23-1501. That law essentially precluded arguments that employer policies could form a part of the employment contract so as to give rise to a claim for breach of contract unless the policies stated in writing that they were intended to be contractually binding. This eliminated most claims of breach of employment contract where the alleged contract was based on company policies, whether in writing or otherwise.
There is a provision in Arizona's wage statute, A.R.S. 23-350, that defines wages to include "severance pay . . . and other amounts promised when the employer has a policy or a practice of making such payments." An argument could be made that your facts fit this definition. I strongly suspect that a court reviewing your case would be inclined to read the two statutes together and conclude that, at least with respect to severance pay, there must be a written policy. The mere fact that others were routinely paid by a particular formula was not a promise to you that you would be offered severance by that same formula.

posted by Francis Fanning  |  Mar 17, 2009 12:16 PM [EST]

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