Tuesday, November 07, 2006

Q: Are You Entitled to Severance? A: It depends.

No Maryland law guarantees an employee's right to severance. Unless an employer promises severance, there is nothing that requires an employer to offer it. However, there are three main ways an employee may obtain severance.

1. As part of an employment contract or severance plan. Some employees negotiate a severance at the outset of their employment. Severance is used as a carrot to entice the employee to accept a job offer. For example, an employer could agree to pay one week of severance for every year of employment. In such case, severance might constitute earned wages under the Maryland Wage Payment and Collection Law. This is important because the MWPCL provides an employee with the opportunity to file suit for earned but unpaid wages, treble damages and attorney's fees.

2. As part of a non compete agreement. Severance can be used to entice an employee to agree not to compete for a period after his or her employment terminates. The Maryland Court of Appeals has suggested that this type of severance is not earned and therefore not covered by the Maryland Wage Payment and Collection Law. (An employee could still recover unpaid severance, but would need to do so by alleging breach of contract.)

3. In exchange for a waiver of claims. When an individual's employment terminates, the employee and employer often want a clean break. They can accomplish this goal by entering into a settlement agreement. Often the employee agrees not to sue in exchange for severance.

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