On June 17, 2011, Governor Scott signed Senate Bill 88 (the “Bill”) into law, which amends Section 215.425, Florida Statutes, in two material ways. As summarized below, the Bill contains significant restrictions on bonuses and severance pay for public employees.
Bonuses
Beginning on July 1, 2011, a public employer may only maintain a policy, ordinance, rule or resolution containing a bonus scheme if the scheme:
- Bases the award of a bonus on work performance;
- Describes the performance standards and evaluation process by which a bonus will be awarded;
- Notifies all employees of the policy, ordinance, rule or resolution before the beginning of the evaluation period on which a bonus will be based; and
- Considers all employees for the bonus.
Severance Pay
Starting on July 1, 2011, a public employer that enters into a contract or employment agreement (or renews or renegotiates an existing contract/employment agreement containing a provision for severance pay) with an officer, agent, employee or contractor can only include a provision for severance pay (defined asactual or constructive compensation, including salary, benefits or perquisites, for employment services yet to be rendered which is provided to an employee who has recently been or is about to be terminated) in that contract if the contract contains the following:
- A requirement that severance pay provided may not exceed an amount greater than 20 weeks of compensation.
- A prohibition on severance pay when the employee has been terminated for misconduct as defined in Section 443.036(30), Florida Statutes.
With respect to the payment of severance pay in the absence of a contract or employment agreement, the Bill prohibits severance pay unless it represents the settlement of an employment dispute. In that case, a public employer may provide severance pay so long as it does not exceed an amount greater than 6 weeks of compensation. In addition, the settlement agreement cannot contain a confidentiality provision.
It remains to be seen how Florida Courts will interpret the foregoing restrictions on bonuses and severance pay. As such, public sector employers must be cautious when implementing bonus schemes and/or providing severance pay.
Author(s): Raquel Elejabarrieta
