Severance pay should be mandatory

by Jim Longworth

In sports, it is not uncommon for a team to fire its coach before his contract expires. No big deal. The owner simply pays off the contract.

In the public sector, contract buy-outs are not always feasible. That’s why, for example, Davidson County probably agreed to pay its school superintendent $10,000 a month for one year after his resignation. 

And of course, in the corporate world, CEOs often bail out early with golden parachutes worth millions of dollars.

Then there’s the rest of us in this post-NAFTA world. We’re the ones who get laid off by the greedy employer who moves his plant to Honduras. The law says we’re entitled to be compensated for hours worked and vacation earned, but that’s it. No benefits, no golden parachute. That’s because thanks to the Fair Labor Standards Act, employers are not required to pay severance.

At the risk of sounding anti-business, that Fair Labor arrangement ain’t so fair, and needs to be changed. I mean, even in Peru employers have the legal obligation to compensate workers who are dislocated through no fault of their own. Not so here in the land of the free.

To add insult to injury, many companies who do offer a severance package do so with strings attached. Case in point, the News & Record, which last week laid off 41 people. As if being fired without cause wasn’t bad enough, these unfortunate souls were then forced to sign a quasi gag order if they wanted to receive a penny of severance pay. That, then, begs the question: If the News & Record didn’t do anything wrong or didn’t feel guilty, why are they so worried about what their former employees might say?

 Experts at tell displaced workers to seek legal advice before signing any severance agreement. “If an employer asks you to sign papers promising that you’ll never sue them (or speak to the media) in order to receive severance pay, beware.  Chances are… he or she may feel they have wrongfully dismissed you.”

Laid-off workers over the age of 40 have even more reason to seek legal counsel. That’s because federal law provides certain protections to us older folks. According to Fortune magazine’s Anne Fisher, you are legally entitled to take 21 days to think over a severance offer before signing, and even after signing it, the law gives you seven more days to change your mind.

So let’s suppose that the FLSA was amended tomorrow, making severance mandatory. What would be a fair amount for compensation? Some say two weeks salary for every year worked would be a reasonable severance. That means if you made $1,000 per week, and were laid off after 10 years of service, you would be entitled to $20,000 in severance pay.

How likely is it that the Fair Labor Standards Act would ever change? Perhaps more than you think. The Lee Hecht Harrison Company polled just over 1,000 human resource officers, and found that about half of them are now voluntarily offering severance packages commensurate with the two week per year formula. And 49 percent of them now offer severance benefits to part-time employees, too.

These trends are encouraging, but Lee Hecht Harrison fails to report just how many of those severance packages have conditions attached to them that threaten displaced workers, and throw them into a moral dilemma. Workers who have just been laid off may choose to provide security for their family by accepting a severance deal, but in doing so they might also be giving up their right to litigate, or freedom to speak in the process.

At any rate, severance pay shouldn’t be considered as hush money. It is remuneration that the employee earned for his or her loyal service over many years, and it should be paid unconditionally. Besides, anyone treated fairly (and with dignity) during the negotiation process would have little reason to sue or speak ill of the employer after the fact. 

Employers who care more about the bottom line than they do their employees must be made to dig down into their huge profits and share the wealth with the workers who made that wealth possible in the first place. 

And so, let’s demand that Congress amend FLSA, and make severance pay for displaced workers  mandatory, with no strings attached. It’s not much of a parachute for people thrown out of work, but it might just ease their fall a bit.

Jim Longworth is host of “Triad Today,” which can be seen Friday mornings at 6:30 a.m. on ABC 45 (cable channel 7), and Sunday nights at 10 p.m. on MY48 (cable channel 15).