Severance Pay and Divorce

Lost jobs are an unfortunate reality of the present economy. Sadly, some of those already facing this unfortunate reality are also hit with another tragedy at the same time: divorce. This issue has hit close to home recently as technology giant Qualcomm laid-off 1,314 full-time San Diego employees in recent months due to company restructuring. Although Qualcomm has provided the laid-off employees with severance packages in order to assist with the transition to new employment, it’s never easy to lose a job and face the uncertainty that comes with unemployment. In such cases where employment termination and a divorce coincide, and the terminated spouse receives a financial severance from their previous employer as did those previous Qualcomm employees, we as divorce attorneys are faced with the task of determining whether the severance is a community asset, and if so, then we must discern how much each spouse is entitled to under California law.

Determining how severance is divided first requires that the payment be characterized as separate or community property. This determination has a lot to do with time. The fundamental question in determining the community or separate character of an employment benefit, in this case a severance package, is whether the right to the benefit accrued during marriage or whether the right accrued only after the parties were separated. If an employee is terminated before separation and receives a severance, the answer to this query is simple. There, regardless of how long before separation it was received, and without having to consider when the right accrued, it will be characterized as community property.

On the other hand, a severance that might accrue after separation, for example, is one offered after separation with the intention to entice the employee spouse into early retirement. Alternately, if the employee spouse entered into an employment contract during the marriage which obligated the employer up-front to pay a severance in case of termination, and even if the employee spouse was terminated after the date of separation, the severance (or at least a portion of it) would be considered community property. In the absence of such a pre-existing contractual obligation, if the employee spouse is fired after separation and the employer just happens to offer a severance, this is likely the employee spouse’s separate property. California courts have also found that unless the right accrued during the marriage, it does not matter if the amount of severance is based on the amount of years employed, even if the employee spouse was employed there throughout the entire marriage.

If you are considering a divorce from your spouse, a legal separation, have already begun the process, or if you simply have questions regarding what will happen to your severance pay or employment benefits upon divorce, please contact us. When situations like these arise, it is important to be represented by competent and experienced legal counsel who will ensure that your rights are protected. Nancy J. Bickford is the only Certified Family Law Specialist (CFLS) in San Diego County who is also a licensed Certified Public Accountant (CPA) with a Master of Business Administration (MBA). Don’t settle for less when determining your rights. Call 858-793-8884 in Del Mar, Carmel Valley, North County or San Diego.

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