severance pay

Is it legal to have an employee keep working as they "close up shop" and be paid their severance pay during that time?
Also, when severance pay is offered, is it usually paid in one lump sum or as the employee is currently paid ie) every two weeks?

1 answer  |  asked Aug 29, 2001 10:48 AM [EST]  |  applies to Arizona

Answers (1)

Francis Fanning
Severance Pay

To understand the answer to your question, you need to understand first that the law does not require the payment of severance pay. Therefore, when an employer chooses to offer severance pay, the employer can pay it in any amount and on any schedule the employer chooses.
When an employer keeps an employee working while it "closes up shop," the employee is being paid wages for work. This is not severance pay, it's just pay. Since the employer isn't required to pay severance pay, the distinction probably doesn't matter, except in a few particular cases.
Employers sometimes pay severance as part of an ERISA benefit plan. In such a case, the employer would be required to follow the terms of the plan in paying out severance. To make you work and call your pay severance may violate the terms of the plan. Also, if some employees are paid more severance because they aren't required to keep working but receive the same amount overall as those who are required to "close up shop," there is the possibility of some form of unlawful discrimination. For example, if the women are laid off immediately and the men are kept working, there may be a claim of sex discrimination.
There is one law that may apply to this situation, depending upon the number of employees laid off and the number kept. The WARN Act, (Workere Adjustment and Retraining Notification Act) 29 U.S.C. 2101 et seq., only applies when an employer employs 100 or more employees and closes all or a substantial portion of a single worksite resulting in 50 or more employees being laid off. If the act applies, the employer must give 60 days notice of the closure. Some employers pay 60 days severance pay in lieu of notice, but the law does not require this or any severance pay. Giving notice to some employees and severance pay in lieu of notice to others does not violate this law.

posted by Francis Fanning  |  Aug 29, 2001 2:16 PM [EST]

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