To All,

I recently got layed off (before Christmas) by my former company after 15 years of service. I was given a severance of 15 weeks starting January 1, 2003. There is a good chance I may rehire (say, April 1, 2003) with the same company under a different position. They will bridge my benefits, allowing me to keep my 15 years seniority and benefits.

Is it customary for a company who rehires a former employee and bridges the benefits, to demand repayment of any "unused" severance? I would appreciate your thoughts on this matter. BTW, they made a lump sum payment of severance in January 2003.

Thank you,

DevoFan

DevoFan -
we are a large (120,000 employee) nationwide company and yes, if we rehire within the severance period (i.e., in your case within 15 weeks after your termination), then we do require a repayment of the remaining severance.

Hi Mary C,

thank you for replying. Will you please explain why it must be paid back? Are there legal issues? It seems to me that when a severance is given out (especially in a lump sum), it is final. The recipient of a severance can use it for whatever means necessary to stay afloat, better himself, pay-off debt, etc... In my case, it was due to a reduction in work force, and had nothing to do with job performance. Therefore, if my former company decides to rehire, I think it is silly for them to demand repayment of unused severance, because it was their responsibility in the first place for laying me off. Oh well....

DevoFan

DevoFan

Does your former employer have a written severance plan set up by a plan document and Summary Plan Description? If so, these provisions should be in writing in both documents. If not. Did you sign a waiver and release document when you were laid off? If so, these provisions should be in the document.

In any event, as Mary C says this is common practice. Also keep in mind that severance pay is not intended to be a windfall.

If nothing was in writing regarding the paying back of unused severance upon rehire, you may or may not have a legal issue. You may want contact an attorney if this is the case

Hi Kip,

there is nothing in their HR policies concerning bridge benefits for rehires. I was told that they would create a new policy and that I would be the guinea pig.

I did sign a waiver and release document which guaranteed receiving of the severance (all in 1 lump sum).

Thanx

DevoFan

DevoFan: If there is nothing in your agreement requiring that you pay the funds back you are not required to do so but the Co could revoke its offer of rehire. However, there are some common sense reasons why it should not request a payback of severance benfits, including the terms of its plan at the time you left and the fact that you waived your rights under all fed and state discrimination laws as a condition of receiving the payments. Making you pay the money back recinds the waiver. Requiring that you return the full amount of your severance pay is a little unfair since you will be out of work for 3 months. In effect the company gets you back without paying for the time you have been unemployed.

Also you have already been taxed on the benefit. The company would have to complete an agreement rescinding the payment and reverse the taxation of the payments which can be very complicated. If you agree to return you need to be held harmless on the taxes- you really need an attorney.

Hi mbozek,

I would not be required to pay back the full severance, rather, any unused severance. I was paid 15 weeks severance on 1/1/2003. This would last until April 16, 2003. Suppose I rehire on 4/1/2003. I would have to pay back 17 days.

Thanx for your reply.

DevoFan

I don't know a thing about severence pay, (I'm a pension geek by trade), but my thought would be to make sure I didn't start until after April 16th especially if it is a standard policy to require repayment of unused severence (which everyone seems to agree it is). If the Company wants you back that much, I would think they would be receptive to you starting April 16th instead of April 1st. Just my unsupported 2 cents.......

DevfoFan
You’re talking about 3 weeks or so that they will want returned? Why push the issue at the risk of not being rehired for 3 weeks of pay? If you received your lump sum payment in January you wont be taxed on it until the end of the 2003 tax year so have them spread the pay back repayments over your paychecks for the remainder of the year by adjusting your pay. That will take care of the tax adjustment. Just make sure they agree in writing to adjust your pay back to what it should be after the pay back is done.

Personally, a job in hand these days is worth the minor hassle.

DevoFan:
Severance is considered an up-front, lump-sum payment in lieu of earned salary to ease in transition of employment, not a bonus or windfall. If you reemploy at the same company before the end of your severance, you are collecting earned pay. You are, therefore, being paid twice for the same week. If the company erroneously issued you two paychecks for the same week, would you would feel you were entitled to keep both?

You've been paid since January 1 without having to work so in fact, you've really not out any money at this point. Is double dipping so important you risk losing any seniority/vacation/
continued pension accrual/medical benefits you built up over 15 years? Think of it, 3 weeks vs. 15 years? Could you walk into a new position at a new company with the same seniority, pay and benefits as a 15 year employee?

I don't mean for this to sound so harsh, and I'm sorry if it does. I've been caught in workforce reductions and have received severance, too, and believe me, in some instances the company were to extend an offer for reemployment based on repayment of a small portion of severance, I would have jumped on it.

D: If you repay any portion of your severance benefits to the er make sure the er reduces the W-2 for severance payments to take into account the repayment. Otherwise you will be taxed on payments you did not keep.