Rhode Island Severance Pay: What you need to know

A Rhode Island law requires employers that receive 50 percent or more of the voting securities of a business through a transfer of control to pay a lump-sum severance benefit to those employees it terminates from the purchased business (RI Stat. Sec. 28-7-19.2). Terminated employees may be entitled to a payment equal to twice their weekly salary multiplied by their years of completed service depending on when they were terminated. A federal court has ruled that this law is preempted by the federal Employee Retirement Income Security Act (ERISA) because it requires employers to set up an ongoing administrative mechanism for determining if an employee is entitled to benefits (United Paperworkers International Union Local 1468 v. Imperial Home Decor Group,76 F.Supp.2d 179 (1999)). Therefore, the state or a court may not enforce the requirement against an employer.
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Another provision of the law gives Rhode Island employees a remedy if they have been denied severance benefits negotiated for in a labor contract that arose through a merger, consolidation, or the sale or transfer of control of an employer (RI Stat. Sec. 28-7-19.1.). It is possible that this provision is also preempted by ERISA.
Last reviewed on May 11, 2016.

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