by Rachel Fields
When the employment relationship ends, the employment benefits don't necessarily end as well. Federal and/or state laws may require employers to continue some benefits for former employees. It may also make good business sense to provide benefits to former employees in some situations. If you're worried that a worker who is leaving might file a lawsuit against the company, you might be able to offer a severance package in exchange for a release.
Unemployment Insurance
An employee who is terminated may file a claim for unemployment insurance. Whether the employee is eligible for unemployment insurance depends on a variety of factors. If you terminated the employee for any reason other than a lack of work for the employee to do, be prepared to defend against a claim for unemployment insurance. You can read the related article, Reasons to Contest Unemployment Claims, for more information.
Health Insurance
Under the federal "COBRA" law, employees may be eligible for continuation of their health insurance benefits whether they quit or were fired. This law applies to employers with 20 or more employees and allows coverage to be extended for up to 18 months. Covered employers are required to inform departing employees of their eligibility for continuing coverage. The employee must pay the cost of continued coverage.
Even if your business is too small to be covered by COBRA, it may be covered by a similar state law. Check with an employment attorney about applicable state laws.
Severance Packages
It is completely up to the employer whether or not to offer a severance package to departing employees. However, employers should be very careful not to make statements about severance packages to employees or to discuss severance packages in the employee handbook. By doing so, an employer might create a legally enforceable expectation on the part of an employee that a severance package will be provided.
Instead, employers should negotiate severance packages on a case-by-case basis. In instances where the employer is concerned that an employee may file a wrongful termination suit, a severance package may be used to negotiate a release from the employee. Read the article, Obtaining a Release for more information.
Find A LawyerFinding a lawyer couldn't be easier! To locate a lawyer in your area choose your state, then your city and then choose a type of law relevant to your situation.