(WASHINGTON) — The Federal Reserve is set to announce on Wednesday whether it will impose another interest rate hike, the central bank’s latest move in a months-long fight that has eased inflation but risks plunging the U.S. into a recession.
The Fed has put forward a string of borrowing cost increases as it tries to slash price hikes by slowing the economy and choking off demand. The approach, however, risks tipping the U.S. economy into a downturn and putting millions out of work.
At a meeting in December, the Fed raised its short-term borrowing rate a half-percentage point, pulling back from three consecutive 0.75% increases and signaling confidence that sky-high inflation could be brought down to normal levels.
Economists expect the Fed to continue softening its approach with a 0.25% rate hike on Wednesday.
The decision comes weeks after a government report showed that inflation slowed in December, marking six consecutive months of easing price increases.
Consumer prices rose 6.5% over the year-long period ending in December, which amounts to a significant slowdown from a summer peak but remains more than triple the Fed’s target inflation rate of 2%.
Cooling inflation has spurred optimism that the U.S. economy may avert a recession. In a report on Monday, the International Monetary Fund projected that U.S. economic growth would slow this year but that the U.S. could still avoid a downturn.
Further, government data last week showed that the U.S. economy grew robustly at the end of last year, defying concerns about an imminent recession.
Still, most economists expect a recession later this year, as interest rate hikes weigh on the economy, according to a survey released by Bloomberg last week. Forecasters expect gross domestic product to fall over the second and third quarters of this year, the survey found.
Growing evidence suggests the Fed’s rate hikes have put the brakes on some economic activity.
Home sales fell for the 11th consecutive month in December, reaching their lowest rate since November 2010, according to the National Association of Realtors.
Meanwhile, U.S. retail sales fell in December, ending the typically busy holiday shopping season with a whimper. Year-over-year retail sales dropped by about 1% last month, extending a nearly identical fall in November.
So far, however, the labor market has proven resilient, buoying the hopes of policymakers seeking to cool prices without causing significant job losses.
In December, employers added 233,000 jobs and wages grew a strong 4.6% compared to a year earlier.
(NEW YORK) — Two travelers claim United Airlines lost their wheelchairs after taking a flight with the carrier earlier this week.
Karah Behrend and Ryan Major were returning from a wheelchair rugby tournament in Jacksonville, Florida, and both said they checked their wheelchairs just before boarding the plane on Sunday, expecting them to be placed in the cargo area.
When the plane arrived in Houston, Behrend said United employees informed them they could not locate the wheelchairs.
“They had been scanned into the system as placed on the plane, but they never actually were placed on the plane,” Behrend told ABC News.
Behrend said she did not want to move from the plane until her chair was located. She said United workers offered to take her to a hotel, but she refused since she would not be able to get around without her wheelchair. Behrend said a United worker then said the police could come and transport her to a hospital until they figured out what to do.
“I was like, absolutely not, you’re not gonna punish me for something that you did. Like at this point you’re holding me hostage,” Behrend said.
Major told ABC News he waited on the jetway for more than 40 minutes while workers tried to locate his wheelchair.
The athletes were also traveling with their rugby wheelchairs and were able to use them during their connection in Houston, but Behrend said they are not intended for such use.
“I had a three-hour layover and those rugby chairs, if we’re in there for a good amount of time, can cause health issues like autonomic dysreflexia, pressure sores that lead to life-threatening infections,” Behrend said. “And on top of that, I wouldn’t have been able to transfer in or out of that chair independently to go to the bathroom. So, I would have pretty much been reduced to an infant at that point.”
Major said United held his connecting flight to New Orleans for about 40 minutes during the incident.
“When I got to the plane, my seat was all in the back, and I could clearly see that the passengers had frustrating faces,” Major said. “So, it’s humiliating that this whole process has left me embarrassed, humiliated and felt like it’s my fault that they were late.”
Behrend returned home to Phoenix later that day. Both their wheelchairs were not returned until Monday night.
In a statement to ABC News, United said: “Our top priority is to provide a safe and comfortable journey for all our customers, especially those who require additional assistance or the use of a wheelchair. We understand that special items like wheelchairs are essential for customers traveling with them. In this case, we have returned both wheelchairs and apologized to both customers. We continue to work with our airport teams to improve our operations in order to deliver these items to our customers in the timely manner they expect from us.”
Behrend said in the future she’ll be placing smart trackers in her adaptive equipment.
“I’ll be personally tracking it all,” Behrend said.
“The wheelchair is like my legs for getting around, like my independence, and then for them to take my wheelchair, that’s a part of my independence that’s been taken away,” Major said. “And I can’t get around without my chair safely and with and without self-confidence.”
More than one in every 100 wheelchairs and scooters transported in the aircraft cargo compartment of domestic flights is damaged, delayed or lost, according to data from the Department of Transportation (DOT).
Of the more than 530,000 wheelchairs and scooters transported by airlines in 2021, 7,329 were mishandled — up from the 3,464 mishandled the year prior, according to the DOT.
(NEW YORK) — Valentine’s Day celebrations just got sweeter with four new doughnuts at Krispy Kreme.
The new heart-shaped doughnuts, which hit menus Tuesday, are made with real Hershey’s milk chocolate and Hershey’s kisses, and are perfect to share with friends or loved ones during Cupid’s busiest season.
Krispy Kreme’s Valentine’s Day Dozen comes in a custom red and pink “Choc-Full-of-Love” box with a heart-shaped cutout to showcase a glimpse of the chocolate sweet treats inside.
Check out the details for each of the specialty flavors below:
First up, the Hershey’s I Pick You doughnut, filled with cream and dipped in Hershey’s chocolate icing, decorated with a buttercream and an icing rose.
The Hershey’s Double Chocolate Kiss doughnut is made with milk chocolate filling, dipped in Hershey’s chocolate icing and covered in mini milk chocolate kisses.
The Hershey’s Strawberry Dream is made with Hershey’s strawberry flavored cream and dipped in a red icing, covered in white chocolate chips and a blend of heart sprinkles.
Finally, the Hershey’s Chocolate Chip Caramel Kreme doughnut is filled with cream, dipped in Hershey’s caramel icing and covered in Hershey’s chocolate icing drizzles, semi-sweet chips and a heart sprinkle blend.
The limited-edition confections are available for pickup or delivery via Krispy Kreme’s app and website.
(NEW YORK) — The moment many sneaker fans have been patiently waiting for has arrived.
Nike and Tiffany & Co. have partnered to create a “Legendary Pair” of the Air Force 1 1837 shoes inspired by the jewelry brand’s sterling silver accessories collection.
Slated to officially release on March 7, the sneakers feature the classic Air Force design in black with suede, as well as Nike’s signature Swoosh in Tiffany Blue and co-branded silver details.
Both companies initially teased the upcoming pair in a Tiffany Blue Nike shoe box, and later revealed a video showing a 360 view of the latest launch.
The highly anticipated shoe serves as a part of a continued celebration of the Air Force 1’s 40th anniversary.
In addition to the sneakers, which will retail for $400, there are also several sterling silver accessories including a whistle pendant, shoehorn, shoe brush and dubraes ranging from $250 to $475.
“When they said ‘just do it’ we listened,” both labels captioned an Instagram post featuring a carousel of accessory images.
While many people were excited to see what both brands came up with, some were a bit underwhelmed with the design.
“I was hoping for white high tops with a Tiffany blue check,” one Instagrammer said.
Another echoed and questioned, “Can we get them in white with the blue? Or even better Tiffany blue and white swoosh? That way it matches the ribbon on the Tiffany box?!”
Others took to Twitter to voice their opinions, arguing that the designers should have taken a nod from a previous collaboration Tiffany & Co. rolled out with Fendi.
For those who do want to get their hands on the Nike & Tiffany Co. Air Force 1 1837 collaboration next month, items will be available at two Tiffany & Co. New York City locations: the Tiffany Flagship Next Door and Tiffany & Co. SoHo. Items will also be available globally via Nike’s SNKRS app and at select Nike partner retail stores in North America.
(NEW YORK) — Sam Bankman-Fried’s bond guarantors should be named publicly, a federal judge ruled Monday after news organizations objected to the names being redacted.
Bankman-Fried was released on a $250 million personal recognizance bond co-signed by his parents and two other non-parental sureties.
The judge agreed with news organizations who argued the public interest weighed in favor of allowing the two names to be released. Bankman-Fried argued there was a risk of physical threats to the parties if their names were exposed.
“If the names of the non-parental sureties are disclosed, it is reasonable to assume that those individuals will become subject to publicity that they would prefer not to attract,” Judge Lewis Kaplan said. “But that alone does not do the trick.”
The judge’s decision comes as prosecutors pushed again on Monday for a ban on Sam Bankman-Fried reaching out to potential witnesses
Kaplan stayed his order until Feb. 7 to allow for an appeal.
Bankman-Fried was charged with fraud and conspiracy following the collapse of the crypto platform he founded, FTX.
Prosecutors asked the judge to modify the conditions of the bond and order Bankman-Fried not to contact or communicate with current or former FTX or Alameda employees and not to use any encrypted messaging apps.
(NEW YORK) — Johnson & Johnson cannot use bankruptcy court to resolve civil lawsuits that claim its iconic baby powder caused cancer, a federal appeals court ruled Monday.
The opinion foiled Johnson & Johnson’s plan to shift onto a new entity, LTL Management LLC, some 38,000 lawsuits that alleged the talc in Johnson’s Baby Powder has caused ovarian cancer and mesothelioma.
LTL Management filed for chapter 11 protection in hopes of resolving the claims that have already cost Johnson & Johnson $1 billion.
The pursuit of bankruptcy protection by LTL Management does not meet the bankruptcy code’s intended purpose, since LTL Management is not in financial distress, the court opinion said.
“Good intentions— such as to protect the J&J brand or comprehensively resolve litigation—do not suffice alone,” the opinion added.
Johnson & Johnson, which maintains its baby powder is safe and does not cause cancer, said it would challenge the ruling.
“LTL Management LLC initiated this process in good faith and our objective has always been to equitably resolve claims related to the Company’s cosmetic talc litigation,” the company said in a statement.
“Today’s ruling does not reflect the facts established during the Bankruptcy Court’s trial regarding the appropriateness of LTL’s formation and filing, nor the Company’s intention to efficiently resolve the cosmetic talc litigation for the benefit of all parties, including current and future claimants,” the company added.
Critics had urged the court to reject the legal maneuver fearing it could prompt other big companies to avoid bringing mass tort lawsuits before juries.
Brian Glasser, an attorney at Bailey & Glasser and trial counsel to the Official Committee of Talc Claimants in the Johnson & Johnson bankruptcy, welcomed the court ruling.
“J&J has no special right to put talc victims in a bankruptcy box. It now has to face these claims in front of juries around the nation,” Glasser said in a statement.
Talc, a mineral used in a host of cosmetic products, forms under similar environmental conditions as asbestos, causing the two to occasionally mix in mines.
In 2019, Johnson & Johnson recalled a shipment of baby powder when a sample tested positive for a trace amount of asbestos, the Food and Drug Administration said. Sales of the talc-based product ended in North America the following year.
The company announced last year that it would stop using talc in its baby powder worldwide in 2023. The ingredient would be replaced with cornstarch, the company said.
(NEW YORK) — Before you start on that charcuterie board, check your meats to ensure they’re safe to consume.
Over 50,000 pounds of ready-to-eat sausage products were recalled Sunday due to possible listeria contamination, the U.S. Department of Agriculture announced.
The agency’s Food Safety and Inspection Service, along with Daniele International LLC, a Rhode Island-based food manufacturer, announced that the recall affected nearly 52,914 pounds of products, which “may be adulterated with Listeria monocytogenes.”
“FSIS discovered the problem during routine inspection activities where Listeria monocytogenes was found on surfaces in which the product came into contact,” the recall stated.
The affected products were produced on dates spanning from May 23, 2022 through Nov. 25, 2022, and were shipped to retailers nationwide through Jan. 17, 2023, FSIS announced.
Eight SKUs under various brand labels are subject to the recall and bear the establishment number “EST. 54” inside the USDA mark of inspection, according to the agency:
– 6-ounce plastic tray of “FREDERIK’S by meijer SPANISH STYLE charcuterie sampler tray” with sell by date 4/15/23.
– 6-ounce plastic tray of “Boar’s Head CHARCUTUERIE TRIO” with sell by dates 4/13/23, 4/14/23, and 4/15/23.
– 7-ounce plastic tray of “COLAMECO’S PRIMO NATURALE GENOA UNCURED SALAMI” with sell by date 12/23/23.
– 7-ounce plastic tray of “COLAMECO’S PRIMO NATURALE BLACK PEPPER UNCURED SALAMI” with use by dates 12/22/23, 12/30/23, and 1/17/24.
– 1-pound plastic tray of “DEL DUCA SOPRESSATA, COPPA & GENOA SALAMI” with sell by dates 4/13/23 and 4/14/23.
– 1-pound plastic tray of “DEL DUCA CALABRESE, PROSCIUTTO & COPPA” with sell by date 5/6/23.
– 1-pound plastic tray of “DEL DUCA GENOA SALAMI, UNCURED PEPPERONI & HARD SALAMI” with use by date 5/4/23.
– 12-ounce plastic tray of “Gourmet Selection SOPRESSATA, CAPOCOLLO, HARD SALAME” with sell by date 4/14/23.
Click here for additional label information and product details provided by the USDA and Daniele International LLC.
“FSIS is concerned that some product may be in consumers’ refrigerators. Consumers who have purchased these products are urged not to consume them. These products should be thrown away or returned to the place of purchase,” Sunday’s recall announcement stated.
As of time of publication, USDA officials said there had been “no confirmed reports of adverse reactions due to consumption of these products.”
“Anyone concerned about an injury or illness should contact a healthcare provider,” the recall added.
According to the Centers for Disease Control and Prevention (CDC), listeria can cause severe illness “when the bacteria spread beyond the gut to other parts of the body” after a person consumes contaminated food.
“Listeria is especially harmful if you are pregnant, aged 65 or older, or have a weakened immune system due to certain medical conditions or treatments,” the CDC states. “If you are pregnant, it can cause pregnancy loss, premature birth, or a life-threatening infection in your newborn. Other people can be infected with Listeria, but they rarely become seriously ill.”
Those at lower risk of severe illness can experience “mild food poisoning symptoms like diarrhea and fever, and usually recover without treatment,” the CDC adds.
ABC News’ Good Morning America has reached out to Daniele International LLC for comment on the recall.
(NEW YORK) — Layoffs have battered the tech industry in 2023, carrying over a series of job cuts that began last year. In all, about 50,000 people have lost their positions this month.
Tech giants such as Google, Microsoft and Amazon have led the sector in the size of their cuts. While a slew of smaller companies like Spotify, Vox Media and IBM have imposed layoffs too.
Sales at top tech firms have retreated from the blistering pace attained during the pandemic, when billions across the world were forced into isolation.
Company officials have often cited economic uncertainty and recession fears in their layoff announcements.
While the large-scale job cuts sound economic alarm, they mark a more immediate, intimate rupture for the workers who suffer them. ABC News spoke with three laid-off workers about what the experience was like and how they’re coping with it.
Nneoma Ajiwe, Spotify
What started as a normal morning turned into a surprise for 29-year-old Nneoma Ajiwe.
Around 5:14 am, Ajiwe says she received a calendar invite requesting her attendance in a one-on-one meeting with someone on Spotify’s HR team.
“It’s funny because the night before I was texting my coworker Tiktoks that we were laughing at and she’s like ‘I don’t mean to alarm you’ and sent this Bloomberg article about Spotify doing layoffs as early as this week,” Ajiwe said. “I told her that we’re probably okay.”
Little did she know, she’d be one of the 6% of employees, roughly around 600, to be slashed from Spotify’s workforce this year.
About an hour after Ajiwe received her calendar invite, Spotify CEO Daniel Ek sent out an email to employees breaking the news.
“I was literally driving on my way to the gym,” Ajiwe said.
The Houston native is a 2016 graduate from the University of Texas at Austin with a bachelor’s degree in public relations. She’d worked for a plethora of companies in the industry such as Billboard, Genius, Sirius XM and XXL Magazine but always saw her career at Spotify as “unattainable.”
Ajiwe had applied five times before she was granted the job of social marketing manager for Spotify for Artists and Spotify Charts in May 2022.
Having been laid off from a different employer before, Ajiwe shared that she felt many different emotions this time around but the one that she felt just days after the Monday layoff was “annoyed.”
“This sucks because I particularly loved this team. I just got there. I loved my job,” Ajiwe said. “I’m still shocked and just trying to sort through feelings and think about what I need to do.”
In response to a request for comment, Spotify provided the memo about the layoffs that Ek sent to employees.
“Like many other leaders, I hoped to sustain the strong tailwinds from the pandemic and believed that our broad global business and lower risk to the impact of a slowdown in ads would insulate us,” Ek said. “In hindsight, I was too ambitious in investing ahead of our revenue growth.”
Although layoffs can cause an immediate bout of financial trouble, Ajiwe works as a photographer on the side and calls herself a “good saver.”
Because of this, she figures she will take a month or so to figure out her next move.
“I wasn’t devastated by the fact that I may not have any money coming in for three months, because I know I have stuff that I do on the side. But it does suck because this was the highest I was making. It was my career,” she said.
“I just think that with every opportunity that has closed for me, something better has always happened. I firmly believe that God is going to put me in a better place,” Ajiwe said.
Jonathan Bellack, Google
Jonathan Bellack, 50, who worked at Google for nearly 15 years, said he knew his tenure was nearly over — and he wanted it that way. Two months ago, he told the company he sought to leave early in 2023.
When he made the request, Bellack had expected Google to work with him on a plan for handing off his duties and saying goodbye. Instead, he didn’t hear much, he said.
“I had an inkling that something was up,” said Bellack, who lives in Montclair, New Jersey.
A self-described “workaholic,” Bellack had climbed the ranks at Google, becoming a senior director of product management who oversaw a team of about 45 employees devoted to developing systems that protect users from phishing schemes and other attacks.
Over time, he says he came to enjoy the mentorship and relationships more than other parts of the job, he said.
Bellack says he woke up at about 5 a.m. on Jan. 20 and found an email telling him “‘the company no longer has a position for you,'” he said.
His access to work email remained long enough for him to see another message announcing company-wide layoffs. Within minutes, he was locked out, he said.
In all, Google slashed 12,000 jobs or about 6% of its workforce. Having watched the onslaught of layoffs in the tech industry, Bellack wasn’t surprised.
“It seemed like the thing all the cool kids were doing in Silicon Valley,” he said of the layoffs.
Google did not respond to a request for comment. In an email to employees last Friday, Google CEO Sundar Pichai said: “This will mean saying goodbye to some incredibly talented people we worked hard to hire and have loved working with.”
The layoffs left Bellack “very torn,” he said. The forced exit clarified his status, allowing him to move on; but he felt badly for colleagues who hadn’t expected it.
“A lot of people had no idea that this was happening or that they might be involved,” he said. “For them, it’s obviously a shock.”
Bellack is not worried about his financial outlook, he said, characterizing his previous job as “aggressively compensated.” Further, he praised the severance package provided by the company, which gave departing employees a 16-week base compensation with an extra two weeks for every year of employment.
A new project already awaits, Bellack said. He has launched a consulting service that advises start-ups and other companies on how to grow.
The father of two sons, aged 9 and 14, Bellack looks forward to lunches with his wife and time with his kids, he said. Their first big move: Getting a dog.
“If you put that in the article, my 9-year-old will be excited,” he said. “It’ll mean I’ve firmly committed.”
Phoebe Gavin, Vox
Phoebe Gavin, 37, the former executive director of talent and development at digital news outlet Vox, was laid off by the company last week. But she had been preparing for something like this ever since a “very scary situation” nearly a decade ago, she said.
In 2014, Gavin lost her job at a different media company. Lacking any savings, she had to “put everything on my credit card to get to my next job,” she said. Since then, she said, she began placing 10% of every paycheck into savings and later cultivated a side gig as a career coach.
Last Friday, Gavin had a previously scheduled meeting with her boss, who told her she was being let go and that she should take the rest of the day off, she said. Vox Media, the parent company of Vox, laid off 130 workers, which amounts to 7% of its staff.
Gavin, who worked at Vox for a little more than a year, oversaw the internal experience of employees, so she understood what her manager could and couldn’t say about the decision. “I wouldn’t have expected her to tell me more,” she said.
The news surprised Gavin, but she knew she worked in a tumultuous business.
“It was a little bit of shock and a little bit of ‘well, I work in the media industry,'” she said.
Vox Media declined comment about the layoffs. In a memo to employees last Friday, Vox Media CEO Jim Bankoff cited “the challenging economic environment impacting our business and industry.”
After years of planning for a possible career setback, Gavin isn’t worried about her finances, she said. In fact, she’s ready to turn her side gig into a full-time job, having turned away clients from her career coaching business over the past six months.
“I’ve had to strike a balance of making sure the side hustle fit into side-hustle time — I don’t have to do that anymore,” she said. “Instead of 6 a.m. to 9 p.m., I’ll work on it from 9 a.m. to 6 p.m.”
Gavin, who is Black, said her commitment to protecting her career owes in part to her knowledge that widespread job losses disproportionately affect people of color and women.
“That’s something that as a society we clearly have to take strong steps to address,” she said. “The system is not going to improve fast enough to keep us safe as individuals.”
To weather the mental health challenges of job flux, Gavin says she will draw on therapy that has helped her assemble an “emotional toolbox,” she said, noting that a more flexible schedule will help her do stress-relieving activities.
“I’m mostly focused on being able to go to the gym in the middle of the day when it’s empty,” she said. “One of the things that helps is picking up heavy things and putting them down.”
(NEW YORK) — Disgraced crypto executive Sam Bankman-Fried has made “recent attempts” to contact prospective witnesses in his criminal case, federal prosecutors said Friday in a letter to the judge that sought new conditions of his release.
Bankman-Fried has been free on a $250 million bond after he was charged with fraud and conspiracy following the collapse of the crypto platform he founded, FTX.
Prosecutors asked the judge to modify the conditions of the bond and order Bankman-Fried not to contact or communicate with current or former FTX or Alameda employees and not to use any encrypted messaging apps.
“The imposition of these new conditions is justified in light of the nature of the case, as well as the defendant’s recent attempts to contact prospective witnesses,” assistant United States Attorney Danielle Sassoon wrote in the government’s letter.
“It has recently come to the Government’s attention that the defendant has been in direct communication with the current General Counsel of FTX US who may be a witness at trial, and who is represented by counsel.”
The outreach was made through Signal, prosecutors said, and by email that said, “I would really love to reconnect and see if there’s a way for us to have a constructive relationship, use each other as resources when possible, or at least vet things with each other.”
Prosecutors said they were concerned the message proposed an alliance and suggested an effort to influence the general counsel’s potential testimony.
“This is particularly concerning given that the defendant is aware that Witness-1 has information that would tend to inculpate the defendant. The Government has interviewed Witness-1, who has firsthand knowledge of the defendant’s conduct during the charged conspiracies, including during the collapse of FTX in November 2022,” the letter said.
The defendant has also contacted other current and former FTX employees, prosecutors said.
There was no immediate response from the defense or the judge.
(NEW YORK) — Continued recession fears and a cascade of tech industry layoffs have drawn renewed attention to severance packages, the compensation offered to some departing employees.
Severance packages, which range widely in size and duration, offer newly unemployed workers a financial buffer as they face an uncertain job market.
But laid-off workers may not fully understand the terms of a severance package, or could feel pressure to accept the terms without looking them over closely, legal and career experts told ABC News.
As employees depart a company, they should be fully informed of the details of a separation and negotiate for the best outcome they can get, the experts added.
“If employers give money, there’s a carrot in front of employees,” Matt Blit, an attorney at employment law firm Levine and Blit, which handles severance cases, told ABC News. “Employees typically sign without even reading them.”
Here’s what you need to know about severance packages:
Why do companies offer severance?
Companies are not required by law to offer severance.
They provide ex-employees with financial and other benefits to blunt the damage caused by a termination that may be unrelated to a worker’s performance, experts told ABC News.
The move also helps companies minimize the public relations backlash that can result from layoffs, they said.
“It sends a message about how you take care of your people,” Alexandra Levitt, a career expert and author of the forthcoming book “Deep Talent,” told ABC News. “Severance is a very important part of that.”
In exchange, workers who accept severance agreements are often required to forgo publicly criticizing the company or bringing legal action against it, the experts said. In some instances, the agreements also stipulate that ex-employees cannot work at rival companies or seek business from the same clients, they added.
“Companies pay severance so that they never have to worry about an employee ever again,” Blit said. “Companies are not in the business of giving away money.”
What’s in a typical severance package?
Experts on severance cautioned there is no common template used for the agreements, leaving the onus on departing employees to ensure they understand a package before accepting it.
“There’s no such thing as a standard severance agreement,” Blit said.
Still, severance packages usually include some or all of a common set of offerings: financial payment, continued access to health care and other benefits, job-search assistance and mental health support.
A company may offer some benefits in lieu of others, the experts said. The wide variation between severance agreements highlights the importance of reading the terms or asking a lawyer to examine them.
“There are so many different angles that employers take,” Blit said.
How severance pay is calculated
The calculation behind the financial compensation offered in severance agreements varies from stingy to generous.
Favorable severance agreements offer one month’s worth of salary for every year of tenure with the company; while more frugal packages provide just one week’s worth of salary for each year, experts said.
If a laid-off employee worked for a company for five years, for instance, his or her compensation at the upper end of the range would amount to nearly a half year’s worth of pay.
In some cases, companies offer a base amount of compensation and an additional sum tied to one’s tenure. Google, which laid off 12,000 workers earlier this month, provided each employee with 16 weeks of severance pay, plus an additional two weeks for each year of tenure.
A federal law, called the WARN Act, mandates that large businesses give 60-day notice when undertaking a mass layoff. Some states, like Illinois and California, impose stronger versions of the nationwide law.
When layoffs must comply with such laws, companies either tell employees about the layoffs before they go into effect or keep workers on the payroll for two months afterward. If laid-off workers remain on the payroll, that compensation can be received separately from the pay offered in a severance package.
If a worker is set to receive a bonus, some employers pay a portion of that payout in the severance package, Blit said. Conversely, some employers demand repayment of a worker’s signing bonus if he or she is terminated before reaching a given tenure threshold, he said.
“If an employee signs on to get a $5,000 bonus and gets terminated within the first year, he may have to give that money back,” Blit said. “You can owe the employer money back.”
When do companies pay severance?
Companies typically pay severance in a single lump sum or over a series of payments that mimic how an employee received his or her salary, experts said.
Under some severance agreements, ex-employees must stop receiving financial compensation if they find a new job, giving reason for some employees to opt for a lump payment.
But the size and timeline of a severance payment carries different tax implications, which can significantly affect the take-home pay enjoyed by a departing worker, experts said.
How is severance taxed?
Severance is taxed in the same manner as wage or salary income.
If payment is received in a large sum, therefore, the recipient faces the higher taxes associated with the elevated tax bracket in which that payment falls.
“You have to be careful looking at a huge sum, keeping in mind that it’s going to be taxed at the same rate as income,” Levitt said. “It’s not a windfall — it’s taxed like any other income.”
Ex-employees who take the income as a continuation of their salary payment will end up paying less in taxes, Blit said.
By comparison, the tax payment required for a lump sum is “astronomical,” he said.
Can employees negotiate severance?
Severance experts encouraged departing employees to negotiate over their severance agreement since they have little to lose and potentially much to gain.
Laid-off workers can push for more compensation or a longer payment timeline, or they can try to exchange non-monetary benefits for monetary ones, Levitt said, adding that newly terminated employees should be sure to remain on good terms with their former employer.
“You don’t have to be rude about it, but you can see if there’s room for negotiation and just do your best,” she said.
When asked whether laid-off workers should negotiate over the terms, Blit said, “Always.”
When employers offer outplacement services, or job-search assistance, laid-off workers should try to exchange that benefit for its equivalent monetary value, he added.
“A lot of employers do provide some outplacement services – I find what employers typically provide to be kind of worthless,” he said. “I usually tell clients to get the money value of it.”
The negotiation over severance should resemble the initial push and pull over a newly hired worker’s salary and benefits, Levitt said.
“There’s negotiation at the start of engagement with an employer and negotiation at the end,” Levitt said.
