Although America’s economy is slowly recovering, Americans are still in fear of mass layoffs or company 
downsizing. Some companies provide their employees the safety net of severance pay when they are laid off, but there are no U.S. laws that require companies to provide compensation as an unemployment benefit. Most severance agreements must be signed by the employee and require that the employee give up their right to take any legal action against their employer for any wrongdoing that may have occurred during their employment.
If presented with a severance agreement, your employer should give you ample time to seek legal advice. Given that most severance agreements will require you to waive your legal rights, you should always consult an attorney if you have doubts about giving up your rights. These agreements can be complex or impose other legal restrictions on you such as Non-Competition clauses, so speaking to an attorney is advisable.
Although the Fair Labor Standards Act (FLSA) does not regulate severance p
ay, there are laws that can function as severance pay laws. The Worker Adjustment and Retraining Notification Act (WARN) requires certain employers to provide 60 days notice of layoffs, and stipulates that employees must be paid for the 60 days regardless if they were required to work or not. The Employee Retirement Income Security Act of 1974 (ERISA) monitors companies that maintain severance pay policies and ensures that plans are executed fairly and honestly.
Discrimination laws may also stand-in as severance pay laws. If the employee feels that he or she was denied severance pay on account of a discriminatory factor such as age, race, disability or gender, the employee may have grounds for an employment discrimination claim.
Written contracts that provide for severance pay may provide a legal basis for a claim if severance pay is promised and then reneged upon. Similarly, if an employer historically offers severance pay to its termin
ated employees and denies you severance pay upon termination without good cause, you may have a breach of implied contract claim, even if severance pay is not provided for in a written contract.
It is always important to consult an attorney when proposed with a severance pay agreement. Seeking legal advice can prevent you from losing your rights as an American worker.