Are you stressed about severance pay?
Hey everyone, I wanted to share some advice from my own experience with leaving a job. I have experienced one layoff and one voluntary resignation. It can be a really tough and confusing time. I hope some of this will help someone out there. This is all information I wish I had known before, learned the hard way, or picked up from others in similar situations.
When I got laid off, the first thing I worried about was money. I applied for unemployment insurance right away through my state’s unemployment website. In California, where I live, that’s the EDD site. This was a lot faster than trying to call on the phone. Generally, if you lose your job through no fault of your own (like a layoff), you’ll be eligible for unemployment benefits. Even if you were fired or quit, you might still qualify in some cases. It really depends on the details. For example, being fired due to budget cuts or being a poor fit is different from being fired for serious misconduct.
Be careful with quitting your job
And if you quit, you usually won’t receive UI unless you have a very good reason. This can include an unsafe work environment or a family emergency, which can be challenging to prove. In my case, since I was laid off, I got approved without a hassle. A couple of weeks after applying, I had a brief phone interview with the unemployment office. I was a bit nervous, but it turns out this is standard procedure. They mainly asked me to confirm how I left my job. This was done to ensure it wasn’t my fault.
They also inquired about whether I was currently seeking employment. I was glad I had kept a simple list of the jobs I was applying for, because I could easily answer those questions. After that, I would simply file weekly or biweekly claims online to report that I was still job-hunting. The checks started coming in. It wasn’t a ton of money, but it definitely helped keep the lights on while I searched for a new job.
If you happen to quit your job by choice, just a heads up that unemployment benefits likely won’t be available (since you left voluntarily). I learned this the other time when I quit a job without another one lined up. I knew I probably wouldn’t get UI, so I had to budget carefully. There are rare cases where you can experience UI after quitting. This includes when you can demonstrate that you had no choice but to leave. But these are the exception, not the rule. So if you’re planning to resign, try to have some savings or a plan to tide you over. You can’t count on unemployment in that scenario.
Health insurance and Severance Pay
The next significant issue I addressed was health insurance. My employer’s health coverage was going to end the same month I left. I found out there’s something called COBRA that lets you continue the same health insurance plan you had through work, for a while after you leave. Sounds great. Except you have to pay the full cost of that insurance yourself, including whatever portion your employer used to cover. In my case, that was a shockingly high amount per month.
COBRA typically provides up to 18 months of continued coverage. But you generally pay the entire premium out of pocket. When I saw the COBRA price, I decided to look at alternatives. Losing your job counts as a “qualifying life event” that allows you to sign up for health insurance on the ACA Marketplace (Healthcare.gov.) This is true even if it’s not during the usual open enrollment period.
Cheaper than COBRA
I ended up comparing plans on the Marketplace and found one with a subsidy (since my income had decreased.) That made it significantly cheaper than COBRA. Everyone’s situation will be different here… If you have a particular doctor or treatment and your work plan is excellent, COBRA might be worth the cost to avoid any interruption. But if you’re relatively healthy or the budget is really tight, definitely check out the Marketplace. Look for potentially more affordable plans. The key is to avoid going without health insurance if possible.
I know it’s tempting to save money when you’re unemployed, but all it takes is one accident or surprise illness to rack up substantial medical bills. I had a friend who skipped any coverage after his layoff to save money. And of course, he ended up in the ER with a broken arm, and the bills were not pretty. One more tip on health coverage…
If you had insurance through your job, your employer (or their insurance administrator) is required to send you information on how to continue your coverage under COBRA soon after you leave. In my case, I got a packet in the mail about two weeks after my last day. There were forms and details on how to elect COBRA. Keep an eye out for that mail, and if you don’t receive anything, reach out to your former HR department. You have deadlines (typically a 60-day window to opt in).
Final paychecks
Ensure you receive everything you’ve earned. Laws about final paychecks can vary by state. Some states require that if you’re fired, you receive your last paycheck on your previous day, or within a very short time. If you quit, the payment may be due by the next scheduled payday or within a certain number of days. There isn’t a universal federal law that requires it to be immediate. However, employers absolutely can’t hold your wages indefinitely. In my case, my company handed me my final check on my last day of work. It included my remaining vacation pay that I hadn’t used as per company policy in California. It requires payment of unused paid time off upon departure.
If your employer owes you for things like unused vacation, sick time (if applicable), or any reimbursable expenses, those should be included. Additionally, if you earned a bonus or commission that was already due, leaving the job doesn’t mean you forfeit that amount. They still owe what you earned. Always review your final pay stub to ensure it is accurate and complete.
If something is missing or if they don’t pay you on time, don’t just let it slide. You can first politely reach out to HR or the payroll department… Sometimes it’s an oversight. If that doesn’t resolve the issue and you suspect they’re not following the law, you can contact your state labour department for help. Wage theft laws are there for a reason. I’ve heard stories on forums of companies “forgetting” to send a final check until the employee reminded them. Don’t be afraid to speak up. It’s money you worked for.
Severance Pay and packages
When I was laid off, I was offered a severance package. A few weeks’ pay to help tide me over. This was extremely helpful, but I was required to sign several papers in exchange. One of those was a release of claims. In plain English, that means I had to agree not to sue the company for any issues related to my employment or termination to receive the severance money. This is pretty common. I actually read it (yes, I read the legalese.) It was mostly a lot of “I won’t sue for XYZ” clauses. I ended up signing because I didn’t feel I had any reason to pursue legal action. I was part of a general layoff, and to the best of my knowledge, I wasn’t being singled out unfairly. Don’t rush to sign something like that if you’re uncomfortable.
Talk to a government agency
You are entitled to request time to review a severance agreement. If you’re over 40 years old, by law they must give you at least 21 days to consider the deal. You have an additional 7 days to change your mind after signing (the Older Workers Benefit Protection Act mandates this). So don’t feel like you have to sign on the spot. If you want a lawyer to look at it, or even just to think it over for a few days, that’s totally reasonable. Also, note that such releases are generally enforceable. This means that if you sign it and later try to sue for, say, discrimination, the agreement you signed can be used against you to dismiss the case.
There are a few rights you can’t sign away. For example, you can still file a charge with the EEOC or talk to a government agency even if you took severance. Those rights can’t be waived. But for the most part, signing means you’re giving up your right to take the company to court. So weigh the pros and cons. If the severance is generous and you’re pretty sure you weren’t fired illegally, it’s often worth taking the money. If you feel you have a strong claim of wrongful termination (like evidence of discrimination or retaliation.) You may want to consult a lawyer before signing anything. It’s a personal decision. I was okay signing mine, and the money did help.
Wrongful termination
Let’s touch on the concept of “wrongful termination” and what’s actually illegal versus just unfair. This one causes a lot of confusion (it did for me as well). In California, most employees are employed “at will,” which means that your employer can fire you at any time, for any reason, or even for no stated reason, and you can also leave at any time. They don’t legally need a good reason to let you go. I had a coworker who was fired very suddenly, and everyone was angry about how unjust it felt.
However, the truth is that unless you have a contract or union protections, your boss can be a total jerk and fire you simply because they feel like it or because they want to hire their buddy instead. That’s legal in an at-will employment context. Now, what’s not legal is firing someone for a specific illegal reason. Some laws protect people from being fired due to discrimination, such as being unable to be fired because of your race, religion, sex, age (over 40), disability, or other protected characteristics. It’s also illegal to fire someone in retaliation for specific actions. This includes whistleblowing, reporting harassment, or filing a workers’ compensation claim. So, for example, firing someone because they got pregnant or because they reported safety violations. That’s illegal.
Not happy with your performance
But firing someone because “we just don’t need you anymore” or “we’re not happy with your performance. “ That’s generally allowed, even if it feels unfair or arbitrary. I think it’s important to know this so you can calibrate your expectations. I’ve seen people threaten to sue for being fired without a reason, not realizing that “no reason” is actually a legally acceptable reason in many places. If you genuinely suspect your firing was due to discrimination or another unlawful reason, then it might be worth seeking legal advice. Otherwise, there may not be much recourse aside from unemployment benefits and moving on. I don’t mean to be a downer, but knowing this helped me kind of come to terms with my layoff. I understood it wasn’t personal, and it wasn’t something I could fight; it was just business.
Significant layoffs
In cases of significant layoffs or plant closures, there’s an additional thing to be aware of: the WARN Act. This is a federal law (with some state versions also in effect) that requires large employers (with 100 or more employees) to provide a 60-day advance notice if they’re conducting a mass layoff or shutting down a facility. If they fail to give you that notice, they might owe you pay for that period. During my layoff, the company provided a warning approximately a month in advance (not the full 60 days, as my company fell under certain size thresholds, so WARN didn’t fully apply). I’ve heard of companies engaging in sneaky tactics, such as laying off just under 50 people at a time to circumvent the law’s definition of a “mass layoff.”
It’s not something you can control as an individual, but it’s helpful to be aware of. Suppose you were part of a large layoff with no notice. In that case, it may be worth investigating whether the Worker Adjustment and Retraining Notification Act applies and if you’re owed additional compensation. Often, companies will include any required WARN pay in the severance package if they didn’t give notice, but some might try to avoid doing so. Knowledge is power here.
Know your employment rights
I also want to acknowledge that some employers handle all this poorly, and it’s not always a smooth process.. I am fortunate that my layoff was handled fairly respectfully (they provided severance, a reasonable amount of notice, etc. But I’ve heard horror stories from others. Examples include employers not informing them of their right to continue health insurance, a boss suggesting they shouldn’t file for unemployment, or HR delaying paperwork. One of my friends was let go, and the company never mentioned anything about COBRA or unemployment benefits. Just handed him a box and showed him the door. He was left to figure out everything on his own. So, if your company isn’t helpful, don’t take their word as the final say.
Department of Labour
There are numerous resources available that you can turn to for support. For example, your state’s labour department website can have info on unemployment and final pay rules, the federal Department of Labour has info on last paychecks and COBRA, and sites like Legal Aid or even community forums can help you understand your rights. If you suspect your employer isn’t following the law (like not paying you what you’re owed, or if they fired you for bringing up a safety issue or something), you might consider consulting with an employment attorney. Additionally, consider filing a complaint with the relevant agency. I’m not saying go nuclear on every little thing, but protect yourself. Companies will look out for their interests. You need to look out for yours.
Also, make sure to take care of yourself during this transition. Leaving a job, whether by choice or not, can be a stressful experience. It can take a toll on your mental health. I felt anxious and even a bit embarrassed after being laid off, even though logically I knew it wasn’t my fault. What helped me was talking to others who had been through the same experience. I realized it’s more common than I thought.
Don’t be afraid to lean on friends or family; if you don’t have that, even posting on communities like this one can provide some support and validation. People here have been through it all. There can be confusing paperwork, challenging bosses, and shaky job searches. Most are happy to share advice or offer encouragement.
Severance Pay Take Aways
Sorry for the lengthy post, but I wanted to cover all the main points I’ve learned, including filing for unemployment, sorting out health insurance, checking your final pay, and understanding your rights, among other important topics.
The key takeaway is to be aware of your options and rights. You’re not entirely at the mercy of your former employer; there are safety nets and laws to help you. Use them. For example, if you’re in the US, don’t forget to apply for that unemployment insurance, consider COBRA or ACA plans to keep your health coverage, and make sure you get the pay and benefits you earned. If you’re ever unsure, you can often find answers on official websites or by asking others who have been there. You’re not alone in this.
Good luck to anyone going through this. It does get better. Feel free to share your own experiences or questions in the comments. We’re all here to help each other navigate this stuff! 💪
Author: Jamie, Mid-30s, spent a decade bouncing between tech startups and mid-sized companies before getting caught up in two layoffs and one voluntary quit.
