Layoffs, severance pay, unemployment benefits and non-compete agreements

Severance pay is not required under any law or statute in Washington, however, it can be a term in an initial employment contract. It can also be part of a collective bargaining agreement. Some companies offer severance pay when laying off or terminating an employee as a good will gesture even if it is not required. Severance pay can also be negotiated to avoid legal issues surrounding a separation or termination, for example if the termination appears discriminatory or retaliatory. Since there is no law requiring severance payments, there is no set amount required, but many companies offer about one month of pay per year of service, and may include other continuing benefits, such has contribution to health insurance for a set period.How does a severance package affect unemployment benefits? Employment Security Commission regulations, under WAC 192-190-045, allow a terminated employee to collect unemployment benefits: “When payment for your separation from work is assigned to any period before the date of separation, it is considered severance pay. Severance pay is not deductible from benefits.” In other words, if the severance is negotiated prior to separation, you can still get unemployment benefits. It can be tricky if the severance is paid out over time rather than a lump sum. While an employee can apply for and receive benefits while being paid out in multiple post-termination paychecks, it is important that the initial fact-finder at ESD understand that this is a severance, not continued employment.Non-compete and non-solicitation agreements in an employment contract can also be an issue when an employee is terminated or laid off. Non-competes survive separation even if you are involuntarily terminated. Non-complete and non-solicitation agreements must be reasonable as to geographic scope and time, but need to be considered when accepting a new job. The former employer can seek a temporary restraining order that prevents you from working and then you will have to litigate to be allowed to start you new job. If you have a non-compete agreement in your employment contract, it is best to contact an attorney to assess the legality of the agreement. They can help you negotiate with your former employer or with both your former and new employer to allow you to start your new job on the right foot.