Employer and employee reading contracts

Resolving Employment Disputes Through Negotiation

By Thomas McKinney

Separation pay, or severance pay, can provide a critical bridge in financial resources for an employee who has been terminated and is looking for a new job or waiting to start a new job. In fact, severance packages are intended to soften the blow of job loss, whether it be due to being fired or being laid off. Employees in particular need to be cognizant of what the law does require, if anything, regarding separation pay in New Jersey as it could come to have a big impact on their financial status should they be terminated from their job.

Is Separation Pay Required by Law in New Jersey?

Generally speaking, New Jersey labor laws do not require employers to provide separation pay to employees who have been terminated. One exception to this involves a very specific set of circumstances. Employers with more than 100 employees and have operated in New Jersey for over three years are required to give adequate notice to their employees in the event of termination, transfer of operations, or mass layoffs. Should the employer fail to provide adequate notice, the employer will be legally obligated to provide full-time employees with severance pay that is equal to one week’s pay per each year of service. This separation pay will be required in addition to any severance package that has been negotiated pursuant to a collective bargaining agreement.

In general, however, most employers will not be required to provide a terminated employee with separation pay unless a separation pay agreement was put in place. In some cases, an employer will put a severance agreement in place for a terminated employee, particularly in situations where an employee was terminated without cause. Other times, an employer may put a severance agreement in place should an employee retire.

Because New Jersey law does not require an employer to provide an employee with separation pay, there are no standards that regulate these kinds of benefits. In most cases, a company that offers separation pay and severance packages will have a formula in place to determine how much separating pay will be given. Most formulas like this will take into account factors such as the employee’s length of service. 

Separation payments are usually offered in one of two forms: lump sum or a series of continuing salary payments. The employee is usually given the choice between the two forms. It is important to weigh these options carefully as the option selected can have important implications for the employee’s eligibility for unemployment insurance benefits as well as significant tax consequences.

Employment Law Attorneys

While no one wants to think about the prospect of getting fired right as they are starting a new job, consider advocating for a severance provision in your employment agreement. A dedicated and knowledgeable employment law attorney can help you negotiate the terms that will maximize protections should you be terminated from your job. The trusted employment law team at Castronovo & McKinney can help you negotiate a strong severance package. Contact us today.

About the Author
Tom McKinney is an experienced NJ Employment Lawyer in all major areas of labor and employment law, including discrimination, harassment, overtime violations, wage and hour claims, sexual harassment, wrongful discharge, Title VII, ADA, ADEA, FMLA, LAD, FLSA, and all other employment law claims. Tom is admitted to practice in the States of New Jersey and New York, United States District Court for the Eastern District of New York, Southern District of New York, District of New Jersey, and United States Court of Appeals for the Third Circuit. Prior to forming the firm, Tom practiced at Gibbons P.C. in Newark, NJ. If you have any questions regarding this article, contact Tom here today.