Severance Pay

New Jersey’s labor laws generally do not require employers to provide severance pay to terminated employees. However, employers that do provide these benefits must do so in accordance with their employment contract or stated policy.

There is one exception. Employers who employ more than 100 employees and have operated in this State for more than three years are required to provide adequate notice to their employees in the event of the termination or transfer of operations or mass layoffs. If the employer fails to provide the required notice, they are obligated to give their full-time employees severance payments equal to one week’s pay for each year of service. This is in addition to any severance negotiated under a collective bargaining agreement or other reason.

Because severance payments usually are not required, there are no standards regulating these benefits. Most companies that offer them, however, determine the amount of severance based on a formula which takes into account a variety of factors including the employee’s length of service.

Oftentimes the employee will have the choice of receiving severance in one lump sum or in a series of continuing salary payments. Which option the employee chooses can have an affect on his or her eligibility for unemployment insurance benefits. The form of severance chosen also can have significant tax consequences for the employee.

Because severance packages are not standard and they can have a significant impact on the employee’s tax situation and unemployment rights, it might be necessary to utilize the services of an experienced employment attorney. If you have been offered or feel you should be offered a severance package, contact Kearns Rotolo Law attorneys for advice. Protect your rights. Call Kearns Rotolo Law today.