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At one time some employers paid departing executives severance pay without any obligation to do so, and sometimes without requiring a release of rights in return.

From the point of view of an owner or stockholder, voluntary severance pay to a departing executive is problematic.

A severance benefit in a union contract looks like an ERISA severance pay plan, but is regulated by federal labor laws.

While employers can create severance pay plans, most do not.

Employees can also bargain with employers over severance pay at the end of their employment relationship.

The employer may want a clean break and a promise by the employee not to suet.

Severance plans typically compute benefits using a formula based on length of service, like a week or month of pay per year of service.


If an employer fails to pay severance promised in an employment agreement, the employee can pursue a breach of contract claim.Employers can voluntarily pay severance to employees, and some used to do it.



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