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Severance packages and discrimination claims

When a woman sued her former employer for discrimination after she rejected a severance package and was subsequently fired, a district court judge dismissed the claim in accordance with the employer's request.

The employer offered the woman a severance package of three months' worth of benefits and wages, then terminated her with no pay or benefits when she did not accept the package. She accused the employer of sex discrimination, alleging that several male employees were transferred to new positions and kept on the payroll prior to their termination in order to provide them with better retirement benefits. Despite the claims dismissal, a U.S. appeals court sided with the woman and has ordered that the case return to court.

One employment law attorney explained that employment discrimination claims involving severance packages are "very rare." However, employers in Maryland and elsewhere who offer an unfair severance package to a terminated worker on the basis of his or her religion, race, gender, age or nationality may in fact be targeted by a discrimination lawsuit.

This does not mean that employers must offer equal packages to all employees. In fact, another employment law attorney asserts that a company's severance policy should be "uniform in formula." He explained, "Objected criteria, to the extent possible, should be uniformly applied to reduce the possibility of a discrimination claim." In other words, two employees' severance offers may be based on factors like their respective positions and years with the employer, but may not differ based on factors like their race or sex.

Human resources professionals recommend that a company exercise care if it plans to offer a severance package that differs significantly from those in the past, as this can invite discrimination claims. In order to prevent this, companies should document their severance practices and thoroughly explain any policy changes.

Source: Human Resource Executive Online, "Severance Packages Can Lead to Discrimination Suits," Larry Keller, Oct. 3, 2012

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