Severance Payments

When Are They Required? What Should They Include?

In Texas, which takes an at-will approach to employment relationships, you can terminate an employee at any time, and for any reason, provided it’s not in violation of a valid employment agreement or contrary to law of public policy. When you fire a worker, though, are you required to provide them with some type of severance pay? When must you do so? If you pay a severance, what should it include?

There Is No General Requirement to Pay Severance

Contrary to what many employers think, there is no legal requirement to pay severance any time you let an employee go. There are a couple situations, however, where you must provide some type of severance to terminated employees:

• If your employee reasonably believed you would pay some type of severance, you may be liable. That belief may come from prior practices at your company (all prior employees who were let go received a severance), from statements made in an employee handbook, or from a written or oral promise to do so.
• Some states require a severance when an employer closes a facility or lays off a large number of workers. Texas is not one of those states.

What Should a Severance Package Include?

There are no legal requirements regarding what should be in a severance package, but you should be consistent with all workers. Most severance packages include some amount for the following:

• Wages or salary—often a set amount for each year of service
• Insurance benefits—Though federal law requires some employers to allow terminated employees access to health care benefits (at their own cost, however), you may choose to pay for those benefits for some period of time
• Outplacement services—You may provide the terminated worker with assistance finding a new position

It’s also common for employers to agree, as part of a worker’s termination, to allow the worker to collect unemployment benefits without contesting the claim.

Contact MCIS Law

At MCIS Law, PLLC, in Stafford, we provide comprehensive counsel to startup and existing businesses in southeast Texas. For a confidential consultation with an experienced and knowledgeable lawyer, email us or call our office at (346) 297-0121. We accept all major credit cards.