Employers – Check Your Severance Arrangements Now!

If employees are required to provide proof of COVID-19 vaccination or a timely negative COVID-19 test, and/or wear a mask as a condition of employment (COVID-19 Policies), and an employee is terminated for violating a COVID-19 Policy, will that employee be entitled to severance benefits?

The answer depends on what the employer intends and the terms of the applicable severance arrangement which, for example, can be in the form of a severance plan, a severance agreement, or an employment agreement.

Severance arrangements should clearly state whether an employee’s termination due to the violation of one of the employer’s work policies is considered a termination “for cause” that results in the employee losing eligibility for severance benefits. Given the climate surrounding COVID-19 Policies, wise employers will make certain that their severance arrangements clearly state whether their COVID-19 Policies are or are not considered a work policy for purposes of the employer’s severance arrangements.

Employers should discuss with their Faegre Drinker labor counsel whether they do or do not want an employee who is terminated for violating a COVID-19 Policy to be eligible for severance benefits. Please note that there are legal and other factors that should be considered when making a determination about changes to your severance policy.

Severance arrangements may need to be amended accordingly.

End of the COBRA Subsidy

As discussed here, employers sponsoring group health plan coverage were required to waive 100% of COBRA premiums for assistance eligible individuals for periods of COBRA coverage that occur during the American Rescue Plan Act (ARPA) “subsidy period.” The subsidy period began on April 1, 2021, and ends September 30, 2021.

Employers should review their severance arrangements to determine if any action is needed now that the ARPA subsidy period is coming to an end. For example, employers that amended their severance arrangements to reflect the ARPA subsidy requirements may need to make additional updates at this time. Or, if an employer’s severance arrangements provide that certain benefits kick in after the end of the ARPA subsidy period, actions may need to be taken to ensure that those benefits are offered starting October 1, 2021.

Please contact your Faegre Drinker benefits attorney for assistance with any severance arrangement review or amendments.