Ten Things About American Labor Law（10）Termination Layoff No Severance Payments are required in the United States
Last episode discussing probation periods might have startled you. Now, let's explore a CEO-friendly concept: Termination without mandatory severance payments.
"No severance? Impossible! I heard Company X paid a year's salary!" Let's demystify this contradiction.
10 Things About U.S. Labor Law
Authored by Attorney Liu | Silicon Valley Corporate Law Specialist
1. Why Severance Payments Aren't Mandatory in the U.S.
🇨🇳 China's For-Cause Employment
"N+1 Rule": 1 month salary per service year + 1 month notice
Termination without cause → Compensation required
Termination with cause → Immediate dismissal
🇺🇸 U.S. At-Will Employment
Employers may terminate at any time, with/without cause
No statutory severance requirements
Probation periods & severance: Two sides of the same coin
Therefore, in the United States, there are actually no legally mandatory severance payments.
2. Global Employment Termination Systems
2.1 Canada
Let’s first look at Canada, which is the closest to the United States. Even Canada, which follows the United States in everything, is clearly different from the United States in terms of employee employment. Canada does not recognize the At-Will Employment system and firmly implements the For-Cause Employment system.
2.2 Germany
Germany implements a strict Termination for Cause system. Employers must have legitimate reasons (such as employees seriously violating company regulations or contractual obligations) to fire employees, and they need to notify in advance and pay compensation.
2.3 France
France does not recognize the concept of "At-Will Employment" and encourages employers to consider firing French employees only when it is absolutely necessary.
2.4 Japan
Finally, let’s look at Japan, which is the country with the strictest For-Cause Employment system in the world.
In English, regular workers are called employees, and contract workers are called contractors. In Japan, they are called regular employees (せいしゃいん) and contract employees (けいやくしゃいん). Let me tell you a phenomenon, and you should understand it. Many Japanese employees can be contract employees (けいやくしゃいん) for decades. When Japanese people become regular employees (せいしゃいん), they are like Fan Jin who passed the imperial examination. The company will support you for the rest of your life.
3. Corporate Severance Payments
Let's address why many large U.S. companies offer generous Severance Payments despite no legal obligation. First, examine actual corporate practices:
Key Observations:
Most corporations provide 1-2 weeks' salary per service year - significantly less than China's standard 1 month's pay per year
Additional benefits may include:
• Extended health insurance coverage
• Transition support programs
• Bonus payouts or stock option vestingExecutive-tier packages often reach 1 month's salary per service year
Why Do Giants Offer These Packages?
"Are these companies just throwing money away?" Absolutely not. In cutthroat tech talent wars, competitive Severance Payments serve as:
Recruitment weapons: Superior packages attract top-tier professionals
Reputation safeguards: Mitigate negative PR from layoffs
Critical Legal Factor: WARN Act Compliance
The Worker Adjustment and Retraining Notification Act (WARN Act) mandates:
60-day advance notice for mass layoffs at companies with 100+ employees
Penalty for non-compliance: 60 days' wages + benefits payout
Startup Exemption
<100 employee ventures are exempt from WARN Act requirements
How Powerful is the Worker Adjustment and Retraining Notification Act (WARN Act)?
The following are real-world cases of companies that violated the WARN Act, including the well-known example of Forever 21, which paid a $2 million settlement for failing to notify employees in advance of its bankruptcy closure:
Specific Examples of Violations of the Worker Adjustment and Retraining Notification Act (WARN Act)
It can be seen that when firing in the United States, don't blindly waste money on severance payments. Of course, I think the audience here will definitely not do that, because you are following Lawyer Liu, the founder who changed the world.
10 things about American labor law, all of which are stories of bosses and employees. I am Lawyer Liu of an American company, thank you for watching.
