Under Florida law, severance agreements are optional. Upon termination, an employer has an obligation to pay all compensation its employee earned less lawful deductions. However, they do not have to offer additional severance pay.
Even though severance pay costs a business money for a former employee who is no longer generating value, there are still several reasons why a business in the Orlando area may want to offer a severance agreement:
- If the business has an employment contract with the employee they want to terminate, they may have to offer severance pay under the terms of the contract. The contract may even spell out the details of this severance pay.
- A severance agreement allows employers to seek a waiver of most of their employee’s claims or potential claims against them. The waiver cuts down on an employer’s legal risk and creates additional stability on the employer’s financial books.
- On a related point, if an employer has reason to believe that the employee’s termination was under questionable legal circumstances, it may be highly advisable to offer a severance agreement with appropriate legal releases.
- An employer can also use a severance agreement to get some additional concessions from a departing employee, such as a commitment to confidentiality.
- An established policy of offering a severance agreement may make one’s business more attractive to the highest caliber of employees. An employer should consider this option carefully if they are in a business prone to economic downturns and cyclical layoffs.
- Severance agreements reduce reputational risk for a business. For example, even if layoffs are unavoidable, they are much easier for affected employees, the business’s customers and the public to swallow when people have some notion that the employer is trying to take care of its former employees in a difficult time.
Florida businesses should carefully consider their severance pay policies
Ultimately, whether to offer severance at all, and under what terms, is a decision that will depend on the unique situation of a Florida business. The business needs to understand its legal options and evaluate how each option will affect the business’s interests.
Also, if the business does opt to offer severance agreements either as a standard practice or only in certain situations, the business will want to make sure its agreement is negotiated and drafted with its best interests in mind.