Severance pay discrimination

VP's not getting severance

There is no right to severance pay under New York law. However, when an employer voluntarily decides to provide a benefit, the benefit has to be provided without regard to the membership of employees in protected classes defined by race, national orgin, religion, gender, age or handicap.

When an employer offers a benefit such as severance to a large number of employees, the severance plan might become a plan governed by the rules established through the Employee Retirement Income Security Act ("ERISA"). ERISA prohibits employers from offering different benefits among similarly situated employees. However, ERISA does allow employers to make distinctions among different types of employees. Thus, an employer might decide to offer all full time employees a severance benefit, but deny all part time employees severance. It might offer executives a better package than offered to clerical employees.

The anti-discrimination laws are intent laws. Meaning, conduct is illegal only if there is proof that the motivation for conduct that was undertaken was, for example, the age of certain employees.

This is not to say that discrimination can never be proven based on its impact upon a certain class of people, but generally, the impact needs to be so statistically significant that the most likely explanation for the apparently objective result is a discriminatory motivation. That is, the statistical analysis needs to result in an expert opinion that says that most likely explanation for an observed result is discrimination.

In every discrimination case, employers have an opportunity to explain what may appear to be a discriminatory result. As the lawyers would say, employer can escape liability by showing it had a legitimate non-discriminatory reason for undertaking certain conduct that may have a discriminatory result.

In your example, I could see an employer saying that denying VPs severance if they decide not to relocate was not discriminatory because the real reason for doing this was to offer a strong incentive for particularly valuable employees to stay on.

Now, discrimination cases are very much fact driven. The outcome of a discrimination case depends on a thorough review of all of the many facts usually involved in employment cases. Your question offers only a limited number of facts. Whether an employer would succeed with an argument that it was only trying to keep valuable employees by offering a strong incentive would depend on many more facts than offered in your query.

posted by David M. Lira  |  Feb 13, 2007 10:16 AM [EST]