Are severance plans subject to governmental regulation?
Yes. The federal Employee Retirement Income Security Act (“ERISA”) regulates severance benefits. If a severance pay situation is not a part of an ERISA covered plan, it is subject to contract, tort and other state and local laws, which generally are not as favorable to employers because of the potential for expensive jury trials and punitive and compensatory damage awards. Plans that are covered by ERISA cannot be regulated directly by the states. Generally, the only things that can be recovered in an ERISA lawsuit are the benefit denied and attorneys fees and costs.
