With the recent push for firing probationary employees and to initiate reductions in force (RIFs) in the executive branch, it would appear timely to discuss the mechanics of the severance pay entitlements for federal executive branch employees.
For executive branch employees in the federal government, severance pay works differently than it does in the private sector. Instead of being a contractual payment negotiated as part of a severance agreement, severance pay is instead issued consistent with relevant law. Severance pay is ultimately statutory (5 U.S.C. § 5595); the statute cannot be lawfully modified by executive order and would require new legislation in Congress to amend. The severance pay statute is further implemented via preexisting Office of Personnel Management (OPM) regulations (5 C.F.R. § 550.701 et seq.).
Under the severance pay laws (which also cover some categories of legislative branch and judicial branch employees as well), qualifying employees who are separated involuntarily from federal service for a qualifying reason are entitled to receive severance pay. There has to be an involuntary removal, and so the employee does not qualify if they voluntarily resign (for example, under the deferred resignation program). However, a resignation after receipt of a notice indicating that a final decision to separate the employee with a specific effective date (as well as certain RIF notices meeting specific requirements found in the regulations) may still give rise to severance pay eligibility.
To qualify, the involuntary separation must not be a “removal for cause on charges of misconduct, delinquency, or inefficiency” (terms defined in the regulations). Whether or not a specific separation notice qualifies requires comparison of the specific allegations or charges to the relevant statutory and regulatory definitions. Employees must have a minimum of 12 months of continuous service to qualify to receive severance pay; for example, many probationers who are within their first 12 months of federal civilian service would not qualify. Employees on term appointments do not qualify unless the employee came to that position from a qualifying non-term appointment without break in service. Employees who are eligible for immediate retirement (even if they do not immediately apply) or who are receiving workers’ compensation benefits are not eligible for severance pay. Notably, if an employee collects severance pay but is later found eligible for immediate retirement (for example, if the employee had applied for FERS disability retirement and the retirement application is only approved for their pension after extended delay or litigation), they lose their prior eligibility for severance pay and have to repay the severance pay received.
In addition, certain limited categories of employees are also excepted from coverage under carveouts spelled out in the statute and regulations. The employee must also have not turned down a “reasonable offer” of a federal position of similar tenure and work schedule as the employee’s prior position, for which the employee is qualified, within the employee’s commuting area, and within 2 grades of the employee’s prior position. Finally, an exception applies for employees being separated from an agency scheduled to be terminated, unless the termination is more than one year after date of appointment and/or for employees who came from a qualifying position to the final position without break in service.
The severance pay entitlement is on a mathematical formula, under which an employee earns one week of severance pay (at their basic pay rate with locality for the salary at time of separation) per year of service for the first 10 years of civilian service, then earns two weeks of severance pay per year of service beyond that. Employees over age 40 receive an extra 10% per year over severance pay total for each year that they are over age 40. However, the statute prescribes a maximum cap on severance at 1 year’s pay at the pay rate at time of separation. An employee who was in unpaid status at time of separation has their severance pay calculated based the pay rate they would have received, had they been in paid status.
Severance pay is normally paid in per-pay-period installments, unless some other law authorizes the agency to pay severance in a lump sum. An employee who receives a time-limited temporary appointment in the federal or District of Columbia government while receiving severance pay has their severance pay paused during their temporary appointment, and then severance resumes after the term appointment expires. Payment of severance pay is terminated early if the employee receives a permanent appointment in the federal or District of Columbia government while still receiving severance pay. If the employee’s separation is later reversed and they are retroactively reinstated to duty with back pay, repayment of the severance pay must be taken out of the back pay.
An eligible employee is able to enforce their right to severance pay via a lawsuit in court under the severance pay statute, 5 U.S.C. § 5595. See Gilbert v. Federal Deposit Insurance Corporation, 950 F.Supp. 1194 (D.D.C. 1997) (citing Bell v. U.S. , 23 Ct.Cl. 73 (1991). Fees for a lawsuit under that statute are available under the Equal Access to Justice Act. See id. Severance pay claims can also be raised in a claim with OPM, filed under 31 U.S.C. § 3702 and 5 C.F.R. § 178.101 et seq.
If you are a current or former federal employee and wish to seek advice concerning your rights regarding severance pay, consider contacting Gilbert Employment Law to request an initial consultation.
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