In today’s unpredictable economy, job security isn’t what it used to be. Layoffs, restructurings, and sudden terminations are affecting workers across every industry. But one critical question continues to surface: Do you get severance if you get fired?
The answer isn’t always straightforward—and it depends heavily on your employment contracts, company policies, and the circumstances of your departure. This comprehensive guide will walk you through what you need to know about severance pay, how to negotiate severance, and what to do if your employer refuses to provide severance pay.
At Hershey Law, our seasoned employment attorneys help clients understand their rights, negotiate severance pay, and pursue fair outcomes in cases involving wrongful termination or unpaid severance benefits.
What Is Severance Pay?
Severance pay is a form of compensation that companies offer to fired employees, laid off employees, or those affected by a mass layoff. It’s often structured as a lump sum or scheduled severance payments, and may include:
- Several weeks of pay based on years of service
- Accrued vacation and sick leave
- Health insurance continuation through COBRA
- Outplacement firm support or career coaching
- Deferred compensation, bonuses, or other benefits
A severance package is generally designed to support the job search process, especially in most cases where finding a new job may take time.
Do You Get Severance If You Get Fired?
Let’s get to the heart of the matter: Do you get severance if you get fired?
In most cases, the answer is: only if you are entitled to it based on your contract or company policy.
There is no legal obligation under federal law, including the Fair Labor Standards Act, to provide severance. However, former employees may receive severance if:
- It’s promised in employment contracts or offer letters
- The company has a history of providing severance packages
- A union agreement includes severance benefits
- The Worker Adjustment and Retraining Notification (WARN) Act applies due to a mass layoff
In California and many other state laws, companies offer severance to avoid legal claims and ease transitions for terminated employees.
Do You Still Get Severance If You Resign Instead of Being Fired?
Severance is typically reserved for terminated employees, but in some cases, employees who resign may still receive severance—especially in situations involving:
- Constructive discharge: When a hostile work environment, discrimination, or harassment makes it impossible to stay employed.
- Mutual separation agreements: Sometimes employers and employees agree to part ways, and severance is offered to smooth the transition.
- Incentivized voluntary exits: In workforce reductions, companies may offer severance to employees who choose to leave voluntarily.
If you’re considering resignation under pressure, consult an employment lawyer to explore whether you can still negotiate severance or pursue a claim under the Civil Rights Act or California’s Fair Employment and Housing Act (FEHA).
Understanding Severance Pay vs. Unemployment Benefits
A common question employees ask after being let go is whether severance pay affects their ability to collect unemployment benefits. While the rules can vary from state to state, here’s how this issue is generally handled in California:
- Lump sum severance: In California, if you receive severance as a one-time lump sum, it typically does not delay your eligibility for unemployment benefits. You can usually apply right away.
- Severance paid over time: If your severance is structured as salary continuation, it may be treated as wages. In that case, the California Employment Development Department (EDD) may delay your unemployment benefits until the severance payments end.
Regardless of structure, it’s important to notify your state unemployment office and provide documentation. Failing to do so can result in overpayments or disqualification.
What’s Included in a Typical Severance Package?
A severance agreement—also referred to as a separation package—may include:
- A lump sum based on years worked or the position held
- Payment for unused PTO or vacation
- Continuation of health coverage
- Bonuses or performance incentives
- Non disparagement clauses and waivers of legal action
- Access to an outplacement firm
Executives or tenured workers may receive additional pay or negotiate benefits such as:
- Stock option acceleration
- Extended health insurance benefits
- Reimbursement for relocation or COBRA premiums
What to Watch for in a Severance Agreement
While a severance package may seem like a generous parting gift, it’s also a legal document—often written in favor of the employer. Before signing anything, it’s critical to review the details carefully or consult with an employment attorney who understands severance agreements and federal and state laws.
Key clauses to watch for include:
- Non-disparagement clauses: These prevent you from speaking negatively about your employer, even if your termination was wrongful.
- Non-compete clauses: Depending on the jurisdiction, these may limit your ability to work in the same industry or region.
- Waivers of legal claims: Signing may forfeit your right to sue for wrongful termination, unpaid wages, discrimination, or retaliation.
If your severance agreement includes unclear language or overly broad restrictions, it may be negotiable or even unenforceable under California employment law. An employment attorney can help you identify risky clauses and push back on unfair terms.
Are Employers Ever Required to Provide Severance?
Generally, under federal law, employers are not required to offer severance pay. However, there are exceptions:
- Employment contracts: If your agreement specifies severance terms, your employer is legally obligated to honor them.
- Company policy or past practice: If most former employees at your company receive severance, you may be entitled to the same based on implied contract principles.
- WARN Act: In the case of a mass layoff or plant closing affecting 50 or more employees, companies may be required to provide advance notice or compensation in lieu of notice under the federal WARN Act or California’s state-level equivalent.
If you suspect you were denied severance in violation of a legal obligation, contact an attorney immediately to assess your claim.
What Happens If the Employer Refuses to Pay Severance?
If your employer refuses to pay severance, but you believe you’re legally entitled to it, take the following steps:
- Review the Employment Agreement: Look for any terms regarding severance policies, amount of severance, or specific conditions.
- Check the Employee Handbook: Internal policies often address how severance benefits are handled for fired employees.
- Speak to the HR Department: Present your case calmly and professionally, citing documentation.
- Submit a Formal Demand Letter: Clearly outline what’s owed, reference your employee’s agreement, and state a timeline for payment.
- Consult an Employment Attorney: A legal team can help determine whether you’re legally obligated to be paid and pursue action if your rights are violated.
How Much Severance Pay Should You Expect?
The amount of severance varies between different companies and industries. General guidelines include:
- One week of pay per year of service for entry-level roles
- Two weeks per year for mid-level positions
- One month or more per year for executives or leadership roles
Example: If you earn $1,500 weekly and worked for 5 years:
- 2 weeks × 5 years = 10 weeks of severance
- $1,500 × 10 = $15,000 lump sum
Companies may offer more based on tenure, value, or to avoid potential legal claims.
Can You Negotiate Severance Pay If You’re Fired?
Yes. Even if not legally required, many companies are willing to negotiate severance in exchange for your employee’s agreement to:
- Waive claims of wrongful termination
- Avoid public complaints or litigation
- Accept non compete clauses or non disparagement clauses
Steps to Negotiate:
- Understand Your Leverage: Was your termination sudden? Was your performance strong? Did company actions violate state laws?
- Identify What to Negotiate:
- More weeks of severance pay
- Continuation of health coverage
- Additional benefits or equity vesting
- Speak Professionally: Schedule a meeting with HR or leadership and prepare your rationale.
- Hire an Employee’s Representative: An employment attorney can guide you or handle talks directly.
Severance and Fired for Cause: Are You Still Eligible?
Fired employees let go for poor performance or policy violations may not be eligible—especially if the severance agreement states severance is excluded for “termination for cause.”
Still, employers may offer severance packages to:
- Avoid bad press
- Resolve disputes
- Prevent lawsuits over wrongful termination or legal claims
This makes legal representation especially important in these scenarios.
Severance Agreements and Your Legal Rights
A severance agreement often includes clauses that:
- Waive your ability to sue the employer
- Include non compete clauses
- Prevent you from speaking publicly
Before you sign:
- Confirm you understand all terms
- Ask questions about tax treatment
- Ensure you’re not giving up critical rights
Severance Pay and Taxes
Under federal law, severance pay is taxable. It’s treated like ordinary income and may affect your tax bracket. If you’re receiving a lump sum, consult a tax advisor to avoid surprises.
You may also qualify for unemployment benefits, even if you receive severance—but this depends on state laws and how your severance payments are structured.
Why You Need an Employment Attorney
Whether you’re negotiating, challenging, or trying to understand your severance package, a knowledgeable employment attorney can:
- Assess the strength of your legal claims
- Help you negotiate severance pay
- Ensure compliance with all state laws and regulations
The decision to accept, negotiate, or challenge a severance package can have lasting financial and professional implications. Whether you’re dealing with a denied severance, pressured into signing quickly, or worried about giving up your rights, working with an employment attorney gives you clarity, leverage, and protection.
Hershey Law is committed to helping terminated employees and laid off workers navigate complex employment laws. From reviewing agreements to filing legal claims when companies fail to pay severance, we fight for your right to fair compensation and a respectful exit.
Contact Hershey Law for Severance Support
If you’ve been fired and are unsure of your rights, reach out to Hershey Law. Where we’ll review your employment agreement, evaluate your entitlement to severance benefits, and work to help secure the severance pay you deserve.
📞 Call us at 310-929-2190
🌐 Visit us online at hersheylaw.com
