Idiot question- but if employment is at-will both sides, why do firms have to (or choose to) pay out severance?

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To avoid lawsuits. You usually have to sign a release to get the severance.

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What lawsuits could apply though? If it’s at-will aren’t they allowed to let you go?

Also can keep people from jumping ship sooner. If you know you’ll get paid if you lose your job, you won’t be as determined to look for one. It helps provide comfort to everyone.

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It's an employee benefit.

Same reason to give at least 2 weeks notice, it is the right thing to do... also severance typically comes in exchange for legal indemnity, so it isn’t completely altruistic

You got the order of those mixed. Businesses don’t do the right thing, they do the smart thing, every time.

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Simple answer - so they eliminate all chance of being sued. Usually chump change for them, but neatly ties up a separation.

Will a release of claim / severance really protect an employer in this case? Couldn’t they still get sued?

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