Post-Termination Pay: Is It Severance Pay Or Wages In Lieu Of Notice?
Losing one’s job is stressful for most employees. Whether a job loss occurred because of a layoff of many workers or was more focused on that particular worker or job, an employer may or may not offer severance pay. However, the employer is responsible for paying the last day’s or the last week’s (or two weeks’) wages on an employee’s final day of work.
Post-termination or severance pay sometimes goes above and beyond compensation for the last days or weeks of work. Texas laws do not require that employers give severance pay but many employers do for one or more of these reasons:
- An employment contract made provisions for severance pay upon termination of an employee.
- An employer decides to provide post-termination pay as a matter of goodwill or good public relations in the community.
An employer may seek an attorney’s advice in connection with post-termination pay to avoid unexpected negative consequences of any particular course of action. Likewise, an employee may ask a lawyer if certain employer policies are legally enforceable or fair.
Brown Law Office in Flower Mound provides guidance and representation to employers and employees from throughout the Dallas-Fort Worth (DFW) metroplex. Many clients consider it beneficial to work with an attorney with nearly 20 years of experience. Fees at Brown Law Office are more affordable than large law firms within the central business district of Dallas or that of Fort Worth, but quality is comparable — or superior thanks to one-on-one attorney-client communication and collaboration.
When Final Pay Is Actually “Wages In Lieu Of Notice”
Specific communications and payment delivery may affect an employee’s eligibility for unemployment compensation depending on whether it is considered severance pay or “wages in lieu of notice.” Section 207.049(1) of the Texas Unemployment Compensation Act (the “Act”) clarifies that a worker will be disqualified from receiving unemployment benefits while receiving wages in lieu of notice.
Final payments — either severance pay or wages in lieu of notice — may be considered a “welfare benefit” under ERISA, in which case employers will need to report it on the IRS report form for ERISA, Form 5500.
Whether you are an employer or employee, you can get a clearer understanding of the nature of severance pay or wages in lieu of notice by discussing particulars of your situation with a knowledgeable attorney.