Workers often have some down time between when they leave one job and when they start the next. Time without income can lead to debt and even a loss of housing. Especially if the company makes the decision to terminate their position, rather than the worker choosing to move on of their own volition, the employee may experience financial hardship because of their loss of employment.
There are certain scenarios in which an employee can expect a severance package and the company that employs them may have an obligation to provide it. When does Rhode Island expect employers to provide workers with severance pay at the time of their termination?
When the termination is due to a merger or acquisition
When one business combines with or purchases another company, there will usually be some redundant positions. The company may have to let go of some of the existing workforce to keep operating costs reasonable.
A company that acquires another business has an obligation to the workforce that it lets go under Rhode Island state law to provide severance pay. The amount that workers will receive will depend on their employment records. Rhode Island law requires that they should receive two weeks’ pay for every year of company service in a lump-sum payment in addition to any wages owed at the time of severance. The company will need to may those payments within one pay period.
When the worker has a contract with the company
Perhaps the most common reason that workers receive severance compensation in Rhode Island is that they negotiated with their employer to receive it when they first took the job. Companies will typically have to uphold their employment contracts and pay severance when letting a worker go unless there are clauses that allow them to and that responsibility because of an employee’s misconduct.
Employees typically find it in their best interests to negotiate a generous severance package, while employers can protect themselves by limiting the circumstances in which workers can demand severance pay or providing themselves protection in situations involving poor work performance or misconduct.
Understanding the rules that govern severance pay obligations can help companies and their staff members navigate conflicts in this sensitive area of employment law.