New Requirements for Employment Contracts That Contain a Provision for Severance Pay

Aug 31, 2018

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Effective January 1, 2019, and pursuant to the new Government Severance Pay Act, contracts or employment agreements entered into by units of local government that contain a provision for severance pay must include the following provisions: 

  • Severance pay may not exceed an amount greater than 20 weeks of compensation; and
  •  Severance pay is prohibited when an officer, agent, employee, or contractor has been fired for misconduct, as defined in the new Act.

 Severance pay is defined as “actual or constructive compensation, including salary, benefits, or perquisites for employment services yet to be rendered which is provided to an employee who has recently been or is about to be terminated.” 

We encourage you to contact your Robbins Schwartz attorney regarding this change in the law prior to entering into or renewing contracts where severance pay is contemplated.