March 3, 2025
By: Wade Herring & Luckshume Ketheeswaran
Conventional wisdom holds that an employer owes a departing employee two weeks’ notice, or separation pay, or both. Once again, conventional wisdom is wrong. Georgia employers have no legal obligation to offer or grant separation pay to an employee who is leaving the company, whether voluntarily or involuntarily. The reason for separation—whether the employee’s resignation, an economic layoff, or a for-cause termination—is irrelevant.
To be sure, the federal Fair Labor Standards Act (FLSA), which governs wage and hour law, requires an employer to pay its employees for all hours worked. However, the FLSA does not require separation pay.
Likewise, no Georgia law requires the employer to pay separation pay to departing employees. (The question of unemployment benefits awarded through the Georgia Department of Labor is a separate question beyond the scope of this article.) Georgia employers retain broad discretion in granting or denying employees, absent a written employment contract. To underscore the point, offer letters and employee handbooks are generally not employment contracts.
If an employer’s handbook policies provide for separation pay, then the employer should honor the policies’ requirements. Regarding benefits, some Georgia case law suggests that an employee handbook may be considered an implied contract. Even so, a handbook is not an employment contract, and Georgia law generally allows an employer to disregard its own policies and procedures. An employer may create a culture wherein both management and employees follow the company’s published rules and standards, but the law neither requires nor enforces these policies.
Some Georgia companies are generous and allow separation pay, while others refuse to offer it at all. Ultimately, separation pay is a matter of agreement between an employer and an employee. As a result, separation pay may be negotiated on a case-by-case basis. Of course, even in an at-will state like Georgia, employers cannot discriminate based on sex, race, or other federally protected categories when making employment decisions, including whether or not to grant separation pay.
When employers make layoffs or other involuntary terminations, employment attorneys may recommend offering separation pay if the departing employee(s) sign a written release agreement waving company liability. For the release to be legally binding, the separation pay must provide consideration, typically financial, in addition to what the employee is already entitled to receive. When used to secure a release, separation pay must be “above and beyond” ordinary compensation and benefits. For employees aged 40 and older, the release agreement must comply with the Older Workers Benefit Protection Act if a claim for age discrimination is to be effectively waived.
Additionally, courts will not uphold non-disclosure or non-disparagement clauses intended to prevent an employee from disclosing sexual assault or harassment if they were agreed to before a dispute about the alleged misconduct arose. As provided in the Speak Out Act that Congress overwhelmingly passed in late 2022, this statutory rule is intended to prevent courts from enforcing clauses and agreements that could discourage or stop victims from freely reporting or disclosing abuse. Agreements made after a dispute arises may include such confidentiality clauses.
The amount of separation pay, which is taxable income by the IRS and therefore subject to withholding, is often based upon the length of an individual’s employment with the company. For example, especially before the Great Recession, larger companies offered separation pay of one week’s pay for every year of service, often capped at a maximum of 15 weeks, or a flat amount pre-determined by the employer. Separation may be distributed as a lump sum or in installments over a set period, with the terms determined by the employer.
Other factors influencing separation pay decisions include the company’s size, financial strength, an employee’s rank and position, the legal risks associated with their departure, and whether the employee had a written employment contract.
Both employers and employees should seek legal counsel about issues relating to separation pay, termination, or employee claims. For assistance negotiating separation pay packages, be sure to consult with an attorney who specializes in labor and employment law.
For more information, please contact Wade Herring (wherring@huntermaclean.com) or Luckshume Ketheeswaran (lketheeswaran@huntermaclean.com) at HunterMaclean, or by phone at (912) 236-0261.
