Jeremy Goldstein Explains The Mystery Of Severance Pay

In today’s unpredictable and competitive employment market, one common concern among employees everywhere is severance pay. Although many people believe that professional jobs automatically come with severance pay, this is not always the case. For those who are job hunting or are concerned about being fired from a professional job, it is important to understand how severance pay works and when it is applicable.

 

 

Severance Pay And The Law

Not all companies are not required by law to provide severance pay. If an employee leaves a job voluntarily, the Fair Labor Standards Act mandates that the worker must be paid his or her wages through the date of completion. Also, the worker is entitled to be paid for any vacation accrual. A severance sum is not mandated by the FLSA. Employers may offer severance pay if they choose to do so. It may be offered to employees on a certain level or all employees of a company. If severance is paid, it is often paid through an agreement between the employee and the employer or a union.

 

In the event of a mass layoff, employers are required by the Worker Adjustment and Retraining Notification Act to notify workers 60 days in advance. If the employer does not or cannot provide notice within that period, the employer is required to pay the workers their regular salary and benefits for 60 days. For example, a company that is closing in 30 days and must lay off workers would still have to pay the workers for 30 days beyond the closing date. If a company promises severance pay in its employee handbook or through an employment contract, the company is required to honor its commitment. Employees who receive a severance benefit are usually required to sign a contract from the employer that liberates the employer from any future legal claims or liabilities.

 

Another common requirement that accompanies severance release forms is an age discrimination release form. Anyone who is over the age of 40 is usually required to sign this form since some people file lawsuits under the Age Discrimination in Employment Act. Employees who are over the age of 40 and are presented with a severance option have 21 days to decide whether or not to accept the offer under federal law. However, employees have 45 days to consider the offer if more than one person is being laid off at the same time and at least two of the workers are over the age of 40. This is because more than one person being laid off at a time is considered a group layoff.

 

 

How Severance Is Paid

Most large companies offer severance in the form of one lump payment. In some instances, severance is calculated based on continuing salary for a certain period. When this is the case, severance may be distributed in several payments. A lump sum is the best option to accept if an employer offers multiple choices for payment. When payments are received in multiple increments, some employers provide a larger payment upfront followed by diminishing payments until there is nothing left to pay.

 

One benefit of receiving multiple payments is continuing health insurance. In some instances, an employer will pay the severed employee’s health coverage until severance pay runs out. Employees can ask about this before accepting a payment structure. Although workers are often allowed under the Consolidated Omnibus Budget Reconciliation Act to continue receiving health benefits from a former employer for up to 18 months, they are usually required to pay the premiums themselves. Many group plans have expensive individual premiums. Some workers who know that they will be laid off may be able to negotiate with an employer to have the company continue paying for health benefits for a certain period.

 

When calculating severance pay, employers usually base it on the worker’s salary and invested years. For example, many large companies that employ top-level executives offer about three weeks of severance pay for every year of work. This means that an executive who worked for a firm for 10 years may receive a severance package that includes between 25 and 30 weeks of pay. For lower-level employees, severance pay is usually equal to less than two weeks of pay for every year spent at the company. In many instances, severance pay comes with a year number cap. This varies from one company to another and may also vary based on an employee’s position.

 

Severance pay is taxed. Receiving a lump sum could put a person in a higher tax bracket. Many workers benefit from contacting a tax professional before accepting a payment option when they are presented with more than one choice. When being laid off, workers can also try to recoup reimbursement for travel expenses, sick time or unused vacation time. Additional benefits such as 401(k) contributions and others may be kept by the employee.

 

 

About Jeremy Goldstein

Jeremy Goldstein is a partner at Jeremy Goldstein, LLC. His firm serves the greater New York City area. Mr. Goldstein earned a bachelor’s degree in history from Cornell University in 1995. He earned a master’s degree in history from the University of Chicago in 1996. In 1999, he earned his law degree from the New York University School of Law. Jeremy Goldstein volunteers his time as a director at Fountain House in New York. The non-profit organization helps men and women receive treatment for mental health issues.

 

In the past, Mr. Goldstein served as a partner for 14 years with another firm. He gained valuable experience in executive compensation with a focus on issues related to mergers and acquisitions. Additionally, he has extensive experience in executive compensation in relation to corporate governance. Jeremy Goldstein is also a member of several prestigious associations related to corporate governance and executive compensation.

Jeremy has contributed before on our blog. Read his opinions on stock options for employees: https://thereisnoconsensus.com/jeremy-goldstein-explains-knockout-options-help-employers/

Learn more:

https://www.visualcv.com/jeremygoldstein

Follow Jeremy Goldstein on Facebook and @jgoldsteinlaw1

How to Know if You’re Being Discriminated Against

Discrimination in business is a complex subject, but at its core, it revolves around whether or not you are being treated fairly and equally by an employer. Most types of discrimination fall into one or more of the following categories – if you believe you’re being discriminated against and it doesn’t match any of these, you may need to consult an attorney for more information.

Race and Ethnicity

Race and Ethnicity are an unfortunately common source of discrimination in the workplace, despite the fact that Title VII of the Civil Rights Act specifically prohibits using race or color in regards to many hiring decisions. It also rejects the use of stereotypes for potential employees, but this doesn’t always stop companies from displaying a bias.

Example: Generic Business Company is a national corporation with offices in twelve states. Twenty-seven percent of its workforce is African-American, and another ten percent is Hispanic, but executive and managerial positions are staffed exclusively by Caucasians. Darryl Johnson is an African-American who has been with the company for seventeen years, and has performed as well (or better than) many people who have been promoted to managers… and repeatedly been denied a promotion despite the fact that his performance demonstrates he deserves it. He is probably being discriminated against.

Gender and Sexual Orientation

Often referred to merely as ‘sex’ in documents, there are times when one’s gender or sexual orientation have an adverse impact on their ability to succeed within the company. This type of discrimination is typically – but not always – financial.

Example: Betty Brown is a manager at Generic Business Company, where she makes an annual salary of $60,580. This is an average salary for female managers in the company, but male managers have an average salary of $75,931, even if they perform worse (and have been employed for a shorter amount of time) than Betty. This is a probable case of gender discrimination, and Betty would be entirely within her rights to inquire about the discrepancy.

Age

Some companies don’t like the costs associated with having older workers, but federal guidelines are clear that age is not an acceptable reason for denying promotions, hiring, or benefits.

Example: Robert Jeffson is a 54-year-old male who has been with Generic Business Company for 30 years. Over that time, he has performed well and steadily been rewarded with raises. However, an economic downturn has cut into the business’ cash reserves, and it decided to fire him because of his ‘inappropriate age for the position he holds’. Robert has a discrimination case on his hands.

Disability

This is the most complex area of discrimination. Companies cannot discriminate against employees who suffer in a way outlined by the Americans with Disabilities Act. However, neither are companies required to lower their quality standards or go to “undue hardship” to provide for that employee.

Example: Carl cannot use his legs, and requires a wheelchair to move around the office. Generic Business Company hired him, but refused to provide him with an elevator key, slowing his movement between floors… then fired him for “consistently failing to move between areas in a timely manner”. GBC’s failure to provide a reasonable accommodation for his disability, then blaming him for problems caused by this, is a clear case of discrimination based on a disability.

Note: In all cases, there are times when exceptions are made to the rules. For example, many companies require bathrooms to be cleaned exclusively by individuals of the same gender as those using it. Refusing to hire a woman to clean the men’s bathroom – or the other way around – is not necessarily discrimination.

Are You Eligible for Workers Comp in California?

You get injured while working. Should you report it or go to your own doctor instead? In California, every employer must carry workers comp insurance. And any injury sustained on the job is covered by that insurance.

What makes you eligible for workers’ compensation?

There are three general requirements for determining whether you are eligible for workers’ compensation.

  • Your employer must be required by law to carry workers’ compensation insurance.
  • You must be an employee of that employer.
  • You must have an injury or illness that is work-related.

Let’s take them one at a time.

Employer required to provide coverage

In the state of California, any company or business that has one employee or more must carry workers’ compensation insurance, or provide proof they are self-insured. There are very few exceptions to this law, so virtually everyone is covered.

Employee of company

To be eligible for workers’ comp, you must be an employee of the company.

Independent contractors are usually not eligible in case of an injury. Volunteers are also usually not covered, though California does allow non-profit organizations to opt in to provide coverage for volunteers.

There are gray areas in the law, however. Some employers try to categorize people as independent contractors, when, by legal definition, they are actually employees. In those cases, the injured employee may be eligible for coverage under their employer’s policy (if it exists).

Work-related injury or illness

The injury or illness must be work-related. In most cases, this is easy to determine. You injured your shoulder while carrying a heavy box at work. You tripped and fell down the stairs at work. You developed carpal tunnel syndrome due to heavy use of the computer keyboard. Those are all easy to see as work-related injuries.

Some injuries or illnesses may not be so easy to figure out if they are work-related or not. Here are a few examples:

  • If you are out of the building, grabbing a sandwich for yourself at a nearby deli and sustain an injury, then you are likely not covered. However, if you are there picking up a lunch order for your employer, you may be covered.
  • You are attending an employee baseball game off hours. You get hit by a ball and sustain an injury. The injury is likely covered by workers’ comp. After the game ends, if you trip getting into your car and sustain an injury, you may or may not be covered.
  • If you are on a business trip and sustain an injury, it is likely covered. If you routinely drive a company car back and forth to work, and sustain an injury during your commute, you are likely covered. If you are driving your own car and sustain an injury during your commute, it is likely not covered.

If you have a work-related injury, you may need to seek legal counsel to make sure you get the proper medical care, disability benefits, and compensation you are eligible for.

California Minimum Wage

The federal government establishes a minimum wage requiring employers to pay their workers a minimum of $7.25 an hour. Politicians are currently debating whether or not to raise that to a more reasonable amount.

Each state can establish its own minimum wage requirement as long as it at least meets the federal requirement. States can require employers to pay a higher minimum wage, but they cannot go below the minimum established by federal law.

California has an established minimum wage of $9 an hour. On January 1, 2016, that will increase to $10. The minimum wage requirement applies to both employers and employees. Employers cannot pay less than the minimum wage and employees are prohibited from agreeing to work for less than that amount. The law only applies to employees and not to those who work as independent contractors. There are some exceptions to the minimum wage requirement and nuances specific to California employers and employees.

Exceptions to the minimum wage requirement

There are some categories of workers to whom employers are not required to pay the minimum wage. They include:

  • Outside sales people or employees for whom generating outside sales is their main job.
  • The employer’s parents, children or spouse.
  • Babysitters under the age of 18.
  • Sheepherders. There is a minimum monthly wage instead of an hourly wage for sheepherders since they work unusual hours and generally live on the farm where they are working.
  • On the job learners may be paid 85 percent of the minimum wage during their first 160 hours of employment while they are learning. This is only if the worker has no previous experience in doing the specific job and is genuinely learning how to do the work.
  • Physically or disabled workers who are employed by nonprofit organizations who have obtained a special license from the Labor Department authorizing them to pay less than the minimum wage.

Specific rules applicable to the way employers calculate minimum wage

California law has some specific rules employers must follow to be sure the minimum wage law is not circumvented. Employees also need to be aware of the laws so they know what they can and cannot expect.

  • Holidays: California employers are not required to provide paid holidays to any employee. If they do so, it is according to their specific policy or to a collective bargaining agreement. Therefore, employees who work on a day considered a holiday are only entitled to be paid at the legally established hourly minimum wage and nothing more.
  • Tips: These belong to the employee who receives the tip. The employer must still pay the minimum hourly wage and what the employee receives as a tip is the employee’s to keep. It cannot be deducted from the minimum wage the employer is required to pay. If the tip is added on to a credit card charge and not left in cash, the employer may not deduct even one cent from the amount for credit card processing.
  • Benefits of meals and lodging: An employer and employee may agree in writing that meals and lodging may be provided to the employee to make up part of the minimum wage requirement. There are legal limits on how much of these expenses can be used to make up the minimum wage.

Whether you are an employer wanting to be sure you are complying with the minimum wage requirement, or an employee concerned about the accuracy of your pay, a California business and employment attorney can help you with your questions.

Poor Performance and Unemployment?

If you have fired an employee for the reason of poor performance, they may still be eligible to receive unemployment. Depending upon the state that you live in, most states consider workers who are terminated because of performance issue to still be eligible in many instances, provided they meet other work requirements.

What Does Poor Performance Mean?

Poor performance can be considered a catch-all term for several different reasons why an employee has been separated from their job. It is often defined as the employee’s inability to meet the standards set for their particular position provided that this inability was not deliberate.

Examples of why you would fire an employee because of poor performance may include that he or she:

  • Is a poor fit for the position in which they were hired
  • Does not have the proper skills or training for the position in which they were hired
  • Has been unable to perform to the standards for the position as expected by the employer
  • Made honest mistakes that cannot be considered willful misconduct

However, if you can prove that the employee has intentionally acted in any of these circumstances, it is possible that their unemployment benefits may be completely denied or delayed for a period of time.

For example, if the employee has intentionally shown misconduct or has acted recklessly against the best interests of your business, it is important not to label their dismissal as due to poor performance. This could be that they have previously performed their job as required, but have now stopped doing so intentionally. Keep in mind this does not include instances where the employee’s skills have declined because of infirmity or other declines.

Reasons Why an Employee May be Ruled Ineligible for Unemployment Benefits

It is important to protect your rights as an employer and help keep your costs for unemployment in check. The most important way is to understand the circumstances in which you would fire an employee under the guise of poor performance versus misconduct. For example, if after repeated warnings your employee has not corrected their behavior or performance to adhere to company policy; this may be grounds for being terminated for reasons of misconduct.

Instances of misconduct may include:

  • Excessive tardiness or unexcused absences
  • Insubordination or causing dissension among other employees
  • Dishonesty or stealing
  • Sexual harassment
  • Violating safety rules
  • Intoxication or failing a drug or alcohol test

The severity of the willful misconduct of the employee will be taken into consideration when determining if and when they will be eligible to collect unemployment benefits.

An Employers Responsibility When it Comes to Sexual Harassment

As an employer, you understand that fear of judgment and backlash can make opening up about sexual harassment tough for an employee. When a victim finally decides to speak up, you must be ready and willing to get to the bottom of the situation immediately.

Keep in mind that as the boss, you’re indirectly responsible for the on-the-job actions of your employees. If you choose to kick allegations of sexual harassment under the rug, it could lead to resentment, reduced productivity and high turnover rates among your employees.

Even worse, if you don’t take action, you could end up with a business-crippling lawsuit on your hands. The entire situation could turn into a chain reaction. Once one employee decides to sue, past victims might come out of the woodwork and fan the flames. Although 6 out of 10 lawsuits, according to information by the Equal Employment Opportunity Commission (EEOC), never see the light of day, why would you want to take that chance?

Interview the parties

Speak to the victim, and then to the accused to get both sides of the story. Get the names of anyone who may have witnessed the incident. There should be two people in management present during both interviews so there is an extra witness just in case the issue spills over to court.

Have the victim sign a statement confirming his or her version of what happened. Document the date and time you spoke with the accuser and the alleged perpetrator. To keep down trouble and confusion, request that the victim avoid speaking to anyone on the job about what happened.

Investigate the matter

Gather all of the information and conduct an investigation via an in-house manager or a lawyer. It’s best to assign at least two people to the investigation to make sure it’s fair and unbiased. Also, document every step of the investigation process, as well as the basis for the outcome.

Take appropriate disciplinary action

If your investigation reveals that the accused did in fact sexually harass a coworker, take disciplinary action. The nature of the action will depend on what happened. If the infraction is small, a written warning may suffice. If the harassment is ongoing and severe, you may have to send the person packing to prevent a lawsuit.

Having a written, anti-harassment policy in place shows you took measures to prevent employee harassment and can protect you legally. Give everyone in the workplace a copy of the manual and have them sign a form indicating they received it. To ensure you cover all the bases, have the handbook drafted by an employment attorney. In addition, go over the handbook annually and update it as needed.