Can a company change a severance package if no contract has been signed?
My husband's company lost a key account that will come into effect in September. They sent out an email saying that, of course, layoffs will happen but so will severance packages of a decent amount. I'm just wondering if the company can change this amount when September gets closer (like a "dangling carrot" to keep employees around while they still need them...)? Does that kind of scenario ever happen? Or does California law protect against it? No one has signed anything and nothing is in writing except for the email that was sent out from corporate.
1 answer | asked Mar 8, 2011 12:35 AM [EST] | applies to California
Answers (1)
Both the federal WARN Act and California law require 60 days' notice of a layoff of a given size, somewhere around 10% of the company's personnel, depending on the size of the company. This period is intended to protect workers from "sudden" loss of employment, and to allow them to plan ahead.
There is nothing that says a company's promise of severance is enforceable, unless it is in writing and signed by a person who can bind the company to a contract. Even then the severance package is enforceable only as a contract, not as wages. It can be dischargeable in bankruptcy. The plan may be enforceable if the company's severance benefits are funded as part of their "qualified plan", which funds other benefits like pension or 401k benefits. Take a look at the "summary plan description" to see if the plan includes severance benefits. That contingency, however, requires the plan administrator, not the company, to decide whether to award the benefit, and how much.
The best thing to do is to plan on other employment if possible. Don't count on the phantom promise of "severance". The company has "WARN"ed.
posted by Janet M. Koehn | Mar 8, 2011 12:23 PM [EST]
There is nothing that says a company's promise of severance is enforceable, unless it is in writing and signed by a person who can bind the company to a contract. Even then the severance package is enforceable only as a contract, not as wages. It can be dischargeable in bankruptcy. The plan may be enforceable if the company's severance benefits are funded as part of their "qualified plan", which funds other benefits like pension or 401k benefits. Take a look at the "summary plan description" to see if the plan includes severance benefits. That contingency, however, requires the plan administrator, not the company, to decide whether to award the benefit, and how much.
The best thing to do is to plan on other employment if possible. Don't count on the phantom promise of "severance". The company has "WARN"ed.
posted by Janet M. Koehn | Mar 8, 2011 12:23 PM [EST]
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