Accepting a new job opportunity comes with a degree of risk. Employees never know until after they start a job whether the culture at the new company is a proper fit for them. Their job might not be as stable as they might hope. Seemingly successful businesses may have Financial challenges not long after acquiring new talent. Those with limited seniority are often the first to lose their positions during downsizing and restructuring efforts.
Many professionals seek to protect themselves from hardship by negotiating severance packages during the hiring process. They make arrangements to continue their benefits and to receive financial compensation if they lose their positions unexpectedly because of an employer’s decision. Occasionally, people who lose their jobs suddenly may have a difficult time obtaining the severance pay that they previously negotiated.
When can employers justify a refusal to uphold a severance agreement with an employee after terminating them?
When they terminate the worker for cause
Many severance agreements include clauses that allow employers to limit or eliminate severance pay in special scenarios. In cases where the company terminates a worker over substandard job performance or major disciplinary issues, the employer may be able to deny the worker severance pay or substantially reduce what the worker receives.
Companies sometimes take steps before a termination that allow the business to justify a refusal to honor a severance agreement. Employees who are subject to performance improvement plans and those who have had multiple disciplinary write-ups in recent weeks could be at risk of losing their right to severance pay in some cases.
When the company files for bankruptcy
There are many different types of business bankruptcy. Some forms of bankruptcy help dissolve an organization. Others may make it easier for the company to remain solvent by eliminating certain forms of financial pressure.
In some cases, employers may use bankruptcy as a means of eliminating wage-related obligations, including severance packages. Workers could be at risk of sudden job termination followed by limited or no severance pay and difficulty obtaining new employment because of an over-saturated local job market.
Understanding the limited scenarios in which employers can legally deny workers contractual severance pay can help people assert themselves. Employees dealing with unfair treatment may need help pushing for the compensation that they deserve according to their contracts with their employers, and that’s okay.
