RIF - Severance Question

blend · August 2002

[font size="1" color="#FF0000"]LAST EDITED ON 08-16-02 AT 12:46PM (CST)[/font][p]The issue is essentially that a company is downsizing (closing a department of 300+ employees) in two phases. Phase 1, the majority of employees (225+) was let go. But, as a result of their downsizing, certain employees have been designated as "key" employees and they have asked those employees to stay on until later this year. Those key employees will be getting a nice stay bonus as part of their severance package – to entice them to stay on until the end. This is all documented in a letter to the individual employees. A formal severance agreement will be given to all employees one month before their termination date for these employees to sign.

My question is this: Assuming a couple of things: 1. The Person who is being let go is “happy” about it; they do not want to work with the company beyond their term date. 2. The only reason they are staying is because of the ‘stay’ bonus. 3. The person already has a job lined up for after the term date. 4. The company has been offering previously laid off employees "other positions" within the company in exchange for dropping their severance packages (phase 1 individuals also got a package - just not as nice as the phase 2 people)

If the company offers a full time position with like salary and responsibilities, can the employee still turn it down and collect their severance? Or by turning down such a position, would the severance package be effectively waived? Would the employee have to wait until the “formal severance agreement” is signed before having a recognizable claim to their stay bonus?

Carol CA · August 2002

I'd like to hear others chime in on this since I'm no attorney, but it seems to me that if you have already documented in writing that if the key employee agrees to stay to date X they will get a stay on bonus and severance package that you have to honor that agreement. I can imagine if you are downsizing as much as it sounds like you are, that even if you offer them another position, they may not want to stay. If they stay until the time you originally specified, you need to pay up.

blend · August 2002

That's just my concern. From the language of the first letter sent out, we essential state that "should you accept another postion within the company.. you may not be eligible to recieve this bonus" (or something to that affect

Sounds to me that the employee would still be entitled to their bonus if they stayed until Date X and chose to reject another positon within the company. I don't think we'd have any way to NOT pay it.

HS · August 2002

It would depend on the language in your separation policy. For instance, ours says that the, "Separation pay benefits will not be available to employees who are dismissed for cause, who refuse a comparable job offer within the company, or who voluntarily resigns."

If it's not in writing, then I would think they should be entitled to the benefit if they stay until the contract date. Do you currently have anything written in that states that their separation benefits could be in jeopardy if they are dismissed with cause? Or if they resign? If not, you could wind up with people not "giving their all" for their position.

Hope this helps.

blend · August 2002

>Do you currently
>have anything written in that states that their separation benefits
>could be in jeopardy if they are dismissed with cause? Or if they
>resign? If not, you could wind up with people not "giving their all"
>for their position.
>
>Hope this helps.

Yeah, the first letter that we sent out does have that in there. We state essentially that receipt of bonus is contingent on performing satisfactorily through Date X unless:
1. volutary term by e/ee or term by us for cause
2. if accept another position, you may not be eligible (discretionary of HR dir)

My opinion is that we could offer a position to someone, but if they say no, we still have to pay the bonus and there isn't anything we can do about it...

But, I could be wrong. Perhaps this first letter doesn't have any "real affect" until the formal severence docs are sent out???

Carol CA · August 2002

You might want to have an attorney take a look at the wording in that first document, but I think the employee would have a strong arguement for getting the bonus and package if they stay on to Date X. If you don't give it, you could have a lawsuit on your hands. You can't go changing the rules part way through the game.

jpepler · August 2002

I think the problem is in your wording . . . "if you accept another position". It doesn't say anything about being offered another position and accepting/denying. Based on your post, it doesn't appear you address the subject of being offered a comparible position and the employee turning it down. I would say you have to pay severance if they terminate on or after the agreed upon date.

RIF - Severance Question

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