The law provides that effective July 1, 2011, a unit of government that enters into a contract or employment agreement, or renewal or renegotiation of an existing contract or employment agreement, that contains a provision for severance pay with an officer, agent, employee, or contractor must include a requirement that severance pay provided may not exceed an amount greater than 20 weeks of compensation. In addition, it includes a prohibition of provision of severance pay when the officer, agent, employee, or contractor has been fired for misconduct.
Also effective July 1, 2011, an officer, agent, employee, or contractor may receive severance pay that is not provided for in a contract or employment agreement if the severance pay represents the settlement of an employment dispute. Such severance pay may not exceed an amount greater than six weeks of compensation. The settlement may not include provisions that limit the ability of any party to the settlement to discuss the dispute or settlement.
Under the legislation, severance pay means the 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.
- The term does not include compensation for:
- Earned and accrued annual, sick, compensatory, or administrative leave;
- Early retirement under provisions established in an actuarially funded pension plan; or
- Any subsidy for the cost of a group insurance plan available to an employee upon normal or disability retirement that is by policy available to all employees of the unit of government pursuant to the unit’s health insurance plan.
Text of the bill is here.