10 Things to Know If You've Been Pink-Slipped - Page 3

6. How Severance Does and Does Not Work

Severance packages, usually a combination of salary, a lump sum of cash, stock options or other benefits, are used to provide for an employee for a period after they leave the employer or as a thank you for service.

It is typically scaled according to the number of years an employee had with their company, as well as their position.

But workers don't have an inherent right to them. There is simply no legal requirement for severance pay. It is more of a bargaining tool; an employee may be able to negotiate for higher severance by agreeing not to hold the company responsible for wrong-doing.

7. What Signing a Release Means

If severance is offered, it is nearly guaranteed to be accompanied with a package of papers that need to be signed, clearing the employer of any wrong-doing. Once this is signed, an employee will have a nearly impossible time trying to sue their employer for wrongfully terminating them, so it is best to consider this before signing.

Older workers will have an easier time, as a law entitles them to extra protection.

According to the federal Older Workers Benefit Protection Act, an employer must give workers 40 or older at least 21 days to review their severance package. These workers are allowed to consult a lawyer to review the contract before signing it, and they have can change their minds within seven days after signing it and revoke acceptance.

8. What Benefits You're Entitled To

Unless an employee is terminated for misconduct or poor performance or their position is eliminated, they are able to receive unemployment benefits. But there are other ways to receive it as well, which is why consulting an employment lawyer may help.

"If you're offered another job within the company at a substantially lower level of compensation and you don't want to take it, you are still eligible for unemployment," said Warren.

Terminated employees have a right to COBRA (Consolidated Omniubus Budget Reconciliation Act) benefits as well, a federal law which allows an individual and their dependents to continue group health and dental coverage even if terminated.

The coverage will generally be with the same carrier at the same level that they had before, at the same price that their company paid, but they have to pay for it themselves. They also cannot let it lapse.

"If you have COBRA and think you're going to need it, you need to exercise those options immediately," said Hoffman.