When an employment relationship ends, one of the most common questions from both employers and employees is: Do I need to give severance pay in Ohio?
The short answer is no—Ohio law does not require employers to provide severance pay. However, the full answer is more nuanced. Severance obligations may arise from contracts, company policies, or negotiation. Employers who mishandle severance packages risk not only legal disputes but also damage to morale and reputation.
As experienced Ohio Employment Lawyers, we guide businesses in structuring severance agreements that minimize risk and support smooth transitions.
What Is Severance Pay?
Severance pay is compensation provided to an employee after termination, typically beyond final wages and accrued benefits. It may be offered as:
A lump-sum payment
Continued salary for a set period
Extended benefits such as health insurance coverage
A combination of financial and non-financial benefits (e.g., outplacement services)
Severance is often framed as a goodwill gesture or part of a negotiated exit. But in some cases, it becomes a contractual obligation.
Does Ohio Law Require Severance Pay?
Ohio is an at-will employment state, meaning employers may generally terminate employees without cause. Because of this, there is no state or federal law mandating severance pay unless certain conditions apply.
That said, severance obligations may arise under the following circumstances:
Employment Contracts
If an employment agreement, collective bargaining agreement, or executive contract promises severance upon termination, the employer is legally bound to honor it.
Company Policies or Handbooks
Some businesses adopt written policies outlining severance benefits. If these policies use binding language, they may create enforceable expectations. Employers must review handbook provisions carefully.
Mass Layoffs and Plant Closings (WARN Act)
Under the federal Worker Adjustment and Retraining Notification (WARN) Act, employers with 100+ employees may be required to provide 60 days’ notice before certain large-scale layoffs or closings. While the WARN Act does not require severance pay, failing to give proper notice may result in liability equal to 60 days’ wages and benefits.
Why Employers Offer Severance Pay Voluntarily
Even when not required, many Ohio employers choose to provide severance. Common reasons include:
Reducing Risk of Litigation
In exchange for severance, employers often require employees to sign a release waiving potential claims, such as wrongful termination, discrimination, or wage disputes.
Protecting Confidential Information
Severance agreements may include confidentiality or non-disparagement clauses, limiting what former employees can say about the company.
Maintaining Goodwill
Severance can soften the impact of layoffs and preserve the company’s reputation with remaining employees and the public.
Securing Non-Compete Agreements
Employers sometimes tie severance payments to non-compete or non-solicitation restrictions, ensuring smoother business continuity.
Key Legal Considerations in Severance Agreements
When offering severance, employers must structure agreements carefully. An Ohio Employment Lawyer can help address:
Age Discrimination in Employment Act (ADEA) Compliance
Special rules apply when waiving age discrimination claims for employees over 40, including a 21-day review period and 7-day revocation period.
Clarity of Release
Agreements must be written in plain language and specify which claims are being waived. Courts will not enforce overly broad or vague waivers.
Non-Compete and Confidentiality Provisions
These must be reasonable in scope, duration, and geography to be enforceable under Ohio law.
Tax Implications
Severance payments are generally taxable wages and must be reported correctly.
Risks of Mishandling Severance Pay in Ohio
Failing to handle severance properly can expose employers to unnecessary risk:
Breach of Contract Claims if promised severance is withheld.
Discrimination Claims if severance is offered inconsistently across groups of employees.
Unenforceable Agreements if waivers or non-compete clauses are poorly drafted.
Damaged Reputation if former employees feel mistreated.
Given these risks, severance agreements should always be reviewed by legal counsel before being finalized.
Practical Tips for Ohio Employers
To navigate severance pay issues effectively, employers should:
Review contracts and policies before making termination decisions.
Standardize severance practices to avoid claims of unfair treatment.
Tie severance to a clear, enforceable release of claims.
Consult an Ohio Employment Lawyer before finalizing agreements.
Communicate respectfully during the termination process to reduce friction.
How an Ohio Employment Lawyer Can Help
Severance pay may seem straightforward, but the legal implications are significant. Experienced counsel can:
Draft and negotiate enforceable severance agreements.
Ensure compliance with federal and Ohio employment laws.
Advise on the strategic use of severance to reduce litigation risk.
Represent employers in disputes over severance obligations.
By partnering with a skilled employment lawyer, businesses can turn severance pay into a protective tool rather than a liability.
Conclusion
So, do you need to give severance pay in Ohio? Not unless you have a contract, policy, or agreement requiring it. Still, many employers provide severance as a strategic way to safeguard confidential information and preserve workplace morale.
If your company is considering severance pay or facing disputes over termination, contact Gertsburg Licata’s Employment Law team for experienced guidance.
