Severance and Your Rights

The firestorm surrounding Microsoft's severance package gaffe - first overpaying about 25 laid off workers, then asking for the money back - brings up a question: Are former workers legally obligated to return money to a company that's let them go?

Although we noticed this story on CIO.com, which picked it up from ComputerWorld, it could apply to finance professionals in any industry.

Microsoft later reversed course and told the laid-off workers to keep the bucks, in large part because of the negative publicity that followed the news. But with so many people facing what's sure to be a lengthy unemployment, it's important to know your legal rights in such a situation. John Phillips, an attorney specializing in employment law with Miller & Martin PLLC in Chattanooga, offered ComputerWorld a quick guide on an employee's rights when they find themselves in such a situation. The legal world is more gray than black and white, but generally the answer depends on what's written in the severance agreement the employee signed.

When You Have to Give the Money Back

Phillips says that if a worker gets overpaid from what the severance agreement specifically states, the company can argue the worker has to pay the difference. If the employer ends up paying the laid-off employee more through an accounting or administrative error, the employee is contractually bound to the amount in the severance package that he or she signed.

When You Don't Have to Give the Money Back

The law is more on the worker's side if the severance agreement actually stated the wrong amount. If it's more than the company intended, the worker is entitled to keep the money. Furthermore, if the company admits the severance agreement stated the wrong amount and asks the employee for a refund, the employer has invalidated the severance agreement and the release of legal claims against the employer that it contains, says Phillips.

Bottom line, read your severance agreement carefully. When in doubt, consult an attorney.