Is it legal for a company with a severance policy to sell the company but not offer severance to their associates?

UPDATED: Sep 30, 2022

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Is it legal for a company with a severance policy to sell the company but not offer severance to their associates?

The company I work for was bought out by another company. The new company is making the associates go through a pre-employment process and will be generating job offers. We were told, if the new company offers us a position but we decline, the company we currently work for will not provide severance packages, even though they have a severance policy and our positions with the current company are being eliminated.

Asked on April 23, 2016 under Employment Labor Law, Kentucky


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

If you have an actual written employment contract with your current employer which guarantees you severance under these circumstances, then they must pay severance: they have to honor the contract, and if they don't, you could sue them for breach of contract. 
However, if the policy is not enshrined in an enforceable written employment contract, it is not a binding policy: rather, it represents the employers at-the-time preference, goals, or intentions. It is subject to change, or simply being ignored, by the employer at any time if they give you notice they are changing, dropping, etc. it. Therefore, if you don't have an employment contract or written severance agreement/contract, they could decline to offer severance now.
Furthermore, if you are offered a position and decline it, that is considered resignation or quitting, and so would also typically provide grounds to not pay severance, even if there was a written agreement for severance.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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