Under Montana law, an employer is not required to give you severance pay, with the exception of earned wages (which includes commissions). But that’s not really the topic of this post. This post refers to the situation in which your employer offers you a severance package worth, say, 6 months or 1 year of wages. When a severance package like this is offered, it’s usually offered in the form of a written contract.
If an employer decides to provide you with severance pay or a severance package, the employer must follow the terms of the employment contract or in absence of a contract, the employer must comply with its established policies. In the situation of a massive layoff or closing of an oil refinery, mine, or plant, a severance package may be available. If there is a union contract, this agreement may spell out the employee’s right to a severance package.
The consequence of taking a severance package largely depends on the language used in any written agreement. You may have to give up your legal rights, that is, if you take the package, you will not be able to sue your employer for laying you off or for firing you or whatever the circumstances may be. The value of a severance package is derived from multiple factors, for example, one factor might be the length of time you worked for the employer. Another factor might be the financial condition of the employer.
Severance agreements can work both ways in regards to provisions related to release from potential liability. An employee may also obligate the employer to release of rights. In a situation where the employee’s termination is related to misconduct, the employee might consider obtaining a release of rights from the employer as well. Covenants not to compete might be considered under the severance agreement.
Even if you have been fired or laid off, you might be able to negotiate severance benefits, including continuation of health insurance benefits. An employee rights attorney can assist you in negotiating severance benefits to ensure your rights are being protected and that you are receiving just compensation for giving up your rights. Keep in mind that severance pay is most likely taxable just like any wages. It could also have an impact on unemployment benefits.