Severance packages were traditionally viewed as effective instruments that raised job security and could guarantee material compensation to employees that had to be laid off. At times of mass layoffs, severance packages used to protect companies from litigation risks on the side of dissatisfied employees. However, new economic conditions have changed eternal legal approaches that seemed to be untouched. This article discusses the relevance of severance packages, when companies are being pressed by the expanding economic crisis.
Significant reduction in severance packages is the direct result of poor economic conditions in the U. S. The author provides an insight into a legal conflict between Cynthia Alsman and Ford Motors who was laid off but did not receive full compensation to which she was eligible under her severance plan. Legal Issue: While Cynthia Alsman is fighting to receive her compensation, the article highlights the three essential legal issues. First, laws do not require that companies use severance packages to protect their employees from the risks of being laid off.
These risks become particularly relevant under the pressure of the growing economic crisis. Second, companies which offer severance packages to their employees, later refuse to pay off employee compensations; very often, acquisitions and mergers become the reasons for misclassifying employees and avoiding responsibility for laying employees off without due material compensation. Acquisition and mergers change employee status, due to the fact the years-of-work clocks start over after acquisition, and those having spent years with one company face the need to start everything from the very beginning.
It is not rare that employees call mergers and acquisitions as “benefit avoidance schemes” used by employees. Third, the article emphasizes the legal issue which arises between the employer and employees who received their severance compensations, signed a waiver, and have later sued their employer. At this point, employers file countersuits against such employees. Unfortunately, the problem of severance packages is not regulated by the state; as a result, employees and employers may fail to protect their rights.