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Frances Perkins, Secretary
Isador Lubin, Comm issioner (on leave)
A. F. Hinrichs, A ctin g Comm issioner


Dismissal Pay Provisions
in Union Agreements
Decem ber 1944


T^o. 808

(Reprinted from the MONTHLY LABOR REVIEW
January 1945, w ith additional datal

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Letter o f Transmittal

n it e d

Sta te s D e p a r t m e n t o f L a b o r ,
B u r e a u o f L a b o r St a t is t ic s ,

Washington, D. C., Feb. 5, 1945.





I have the honor to transmit herewith a report on dismissal-pay provisions
in union agreements. This report is based on a study of 9,500 agreements current
as of December 1944, as well as several dismissal-pay plans not negotiated
through collective bargaining.
This bulletin, a portion of which appeared in the January 1945 issue of the
Monthly Labor Review, was prepared by Abraham Weiss under the direction
of Florence Peterson, Chief of the Bureau’s Industrial Relations Division.
A. F. H

in r ic h s ,

Acting Commissioner.


. F



e r k in s ,

Secretary of Labor.

P age

Summary------------------------------------------------------------Special dismissal-pay plans_______________________
Railroad workers_____________________________
Telegraph workers___________________________
New York milk-wagon drivers________________
Dismissal-pay plans in union agreements--------------Newspaper Guild plans------------------------- -------International Typographical Union agreements
Agreements of Office and Professional Workers.
Other agreements____________________________
Graduated-pay plans_________________________
Appendix.— Sample dismissal-pay clauses__________

(U )







B ulletin 7^o. 808 o f the
U nited States Bureau o f Labor Statistics
[Reprinted from the M onthly L abor R eview , January 1945, with additional data]

Dismissal-Pay Provisions in Union Agreements,
December 1944

Dismissal or severance compensation generally refers to payment,
in addition to wages or salary, of a sum of money by the employer
to an employee who is involuntarily laid off or discharged through
no fault of his own. The amount of dismissal pay is in almost all
instances based on an employee’s length of service with the company,
his rate of pay during such employment, and the reason for his dis­
missal. A few severance-wage plans make no distinction as to reasons
for dismissal and provide payment to employees discharged for cause,
as well as to those who retire or resign.
Under most plans, the dismissal payment varies directly with the
amount of earnings of the employee. A week’s wages or a month’s
salary is usually the unit for determining compensation. Most plans
also relate compensation to length of service, but generally establish
a limit on the amount payable to any individual worker—in terms of
either a number of weeks’ or months’ pay or a specified sum. Dismissal
compensation almost invariably is paid in a lump sum, although a
few plans provide for periodic payments at regular weekly intervals.
As a rule, dismissals are compensated only if they are caused by
circumstances over which the employee has no control, and some plans
are further limited to cover dismissals resulting from technological
changes or business mergers but not general lay-offs caused by slack
work. Although dismissal compensation is sometimes paid to em­
ployees dismissed because of incompetence or inefficiency, generally
the service requirements are higher and the maximum dismissal allow­
ance is less than in the case of dismissal because of business reasons.
Although dismissal compensation is designed to ease the burden
resulting from unemployment, it is basically different from unemploy­
ment compensation or unemployment insurance. The latter may or
may not be financed from a joint fund, whereas dismissal compensation
is financed solely by the employer. Unemployment compensation
provides weekly (or biweekly or monthly) payments for the duration
of unemployment or for the maximum number of weeks specified in
the particular plan. Dismissal compensation, on the other hand, is
usually a lump-sum payment, which is based on the length of service
of the employee, and it takes no account of the actual time lost before
a new job is found. Unemployment-compensation benefits are
usually equal to about half pay, and are paid after a waiting period of


1 or 2 weeks; dismissal compensation is almost invariably based on
the employee’s full weekly wage or salary and is generally paid at
the time of dismissal.
In the past and, to some extent today, dismissal compensation
indemnified the employee for final loss of his job and connoted a com­
plete and permanent severance of the employment relationship; it
represented a payment made for breaking a valuable relationship
rather than reimbursement to cover a period of unemployment and
was intended to compensate the worker for the loss of certain rights
acquired on the job, such as seniority, vacation, pension, or retirement
benefits. Most current union agreements, however, in providing dis­
missal pay do not distinguish temporary lay-off from permanent
separation. Some agreements, notably those covering clerical or pro­
fessional workers, do not use the term “ lay-off” ; other agreements
use the term to denote dismissals; while still others allow dismissal
pay to workers “ laid off or dismissed.” 1
The American Newspaper Guild, which has succeeded in making
dismissal pay a basic condition in practically all its agreements, regards
dismissal pay as an equity which the individual employee builds up
on his job and for which he should be compensated regardless of the
reason of severance— whether for incompetence or other personal cause,
or for economic reasons, by resignation, retirement, or death. The
Guild is accordingly opposed to the use of the term “ dismissal pay” and
prefers “ severance pay.”
Most union agreements, whether or not they provide for dismissal
pay, specify that employees laid off shall not lose their seniority status
if rehired within a specified period. Also, an employee who receives dis­
missal pay when laid off does not lose status with the company but
maintains reemployment rights based on his past service with the
company, entitling him to be rehired before new persons are employed.
Under dismissal plans which allow only 1 or 2 weeks’ pay, seniority
probably accumulates during lay-off, and reinstated employees would
again receive dismissal pay, if again laid off, based on total service.
Under a very few of the dismissal plans which allow more than 1 or
2 weeks’ pay, if reinstatement takes place within a short time, it is
rovided that a portion of the dismissal pay, equal to the difference
etw een the number of weeks’ dismissal pay received and the number of
weeks of lay-off, shall be returned to the company through deductions
from wages. It is not clear, in these cases, whether an employee again
laid off would be credited with prior service in determining the dis­
missal pay to which he is eligible. Under the Newspaper Guild
agreements, and most others, there is no return of the dismissal pay
but the reinstated employee, if laid off again, receives dismissal pay
based on length of service only since the date of rehiring and not on
total accumulated length of service with the company.
Dismissal compensation has not been common in American in­
dustry. When adopted, it has most frequently been applied to lay­
offs caused by technological improvements or tp retrenchments in­
volved in consolidations. In only a few industries, notably newspaper
publishing and railroad transportation, have such provisions been
adopted to any considerable extent through collective-bargaining


* The term “ dismissal pay” is b y no means uniform in union agreements; the phrases “ severance p a y /'
‘severance com pensation/' “ termination allow ance/' “ separation p a y /' etc., are also found.

A considerable number of agreements covering clerical workers in
offices and industrial establishments, and technical and social-service
workers also provide dismissal pay. Scattered examples of dismissalpay clauses are found in agreements in other industries including the
chemical, electrical machinery, gas, petroleum refining and production,
radio and telegraph, rayon yam, telephone, and textile industries.
Special Dism issal-Pay Plans

In addition to the dismissal-pay plans provided in the agreements
negotiated between individual employers and unions are those pro­
vided by law or arbitration award to take care of special circumstances
within an industry. One of the first of these was a plan established
by the trade board at a Chicago men’s clothing company in 1926 to
encourage a reduction in the surplus of cutters caused by changes in
manufacturing processes. Under this plan every cutter who relin­
quished his job was paid a dismissal wage of $500. About one-fifth
of the cost incurred was borne by the union, and the rest by the firm.
More recently, dismissal-pay plans have been adopted when large
numbers of workers were to be laid off because of business consolida­
tions or retrenchments. Outstanding examples are the plans provided
for railroad and telegraph workers and New York milk-wagon drivers.
Railroad workers.—Because of the fear of railroad workers that pos­
sible consolidation among the railroads under the Emergency Railroad
Transportation Act would result in widespread lay-offs, a nation-wide
agreement3 was negotiated between the operating and nonoperating
railroad unions and the carriers, which established a plan for compen­
sating employees laid off . as a result of “ coordination.” Displaced
employees are entitled to receive monthly payments for periods
ranging from 6 months after 1 year of service to 60 months after 15
years’ service or more. The monthly payment is equivalent to 60
percent of the average monthly pay of the employee for the 12-month
period preceding the dismissal. Employees with less than 1 year of
service receive a lump-sum payment equivalent to 60 days’ pay at the
straight-time daily rate of their last position held prior to loss of
Telegraph workers.—Early in 1943, Congress amended the Com­
munications Act of 1934 to permit consolidation and merger of domes­
tic telegraph carriers and made provision for dismissal pay to workers
whose jobs were terminated as a result of the merger and for the
continued employment of other workers.4 The amendment provided
that employees of any merged company, whose employment began
before a specified date, were to be assured employment for at least 4
years after the merger without reduction in compensation, and any
employee whose employment began after the specified date, who was
discharged as a result of the merger, would at any time within 4 years
after the merger be entitled to severance pay of 1 month’s wages for
each year worked.
New York milk-wagon drivers.— In the summer of 1943, union milkwagon drivers employed by two major New York milk companies
faced loss of their jobs because of route consolidation stnd job elimina­
* This “ Washington Agreement” was negotiated in M a y 1936 for a 5*
*year term but has since been renewed
for an indefinite period.
* Section 222-f,

tion necessitated by the mileage-reduction program of the Office of
Defense Transportation. To decide a dispute between the drivers,
union and the companies over the displacement of these employees,
the National War Labor B oard5 granted dismissal pay to employees
who lost their jobs because of the consolidation, on the basis of their
former straight-time weekly earnings, ranging from 2 weeks’ pay for
employees with less than 6 months’ service to 10 weeks’ pay for those
with service of 3 years or more.
D ism issal-Pay Plans in Union Agreements

Approximately 450 dismissal-pay plans covering about 135,000
workers were found in 9,500 current agreements examined. This did
not include provisions in union agreements providing for advance
notice of lay-off or pay in lieu of such notice, or dismissal-pay provi­
sions in union agreements which contain guaranties of employment
and in which such payment is made only in the event the guaranty is
voided under stipulated circumstances. Slightly over a third of the
dismissal-pay agreements were negotiated by the American Newspaper
Guild (C. I. O.), covering approximately 20,000 workers; a similar
proportion, covering about 7,500 workers, were negotiated by the
International Typographical Union (A. F. of L .); about one-sixth,
covering between 5,000 and 7,000 workers, were negotiated by the
United Office and Professional Workers (C. I. O.); and the remaining
agreements, negotiated by various unions, covered about 100,000

Over 90 percent of the 182 agreements negotiated by the American
Newspaper Guild, covering employees (except those in mechanical
trades) working for newspapers, wire services, news weeklies and
magazines, radio stations and allied fields, provide for severance pay.6
Under most of the Guild agreements, dismissal pay is allowed for all
dismissals except for gross misconduct and neglect of duty, dishonesty,
drunkenness, gross insubordination, willful provocation of discharge
to collect dismissal pay, and under union-shop agreements, failure to
maintain good-standing membership. In about 15 percent of the
agreements, the right to receive dismissal pay is unqualified, and
payment must be made regardless of the reason for dismissal.
About half of the agreements provide a severance allowance payable
to the beneficiary of an employee who dies while in the employ of the
publisher. Twenty-seven provide that dismissal pay will be given
on bona fide retirement, and 9 provide dismissal pay on resignation.
Retirement benefits usually are limited to employees with 25 years
of service and may specify illness or old age as conditions. Such
provisions frequently give the employer reciprocal rights of retiring
an employee who has reached a certain age, such as 65, and a stated
length of service, although the Guild prefers to make retirement
solely a matter of the employee’s choice.
Veterans participate in dismissal pay in a special way; 125 Guild
agreements specify that they will receive such grants if disabled during•
« N . W . L . B . Case N o. 197, Release B-1017, dated October 4,1943.
• Information obtained from Wages and Conditions in American Newspaper Gu^ld Contracts, June 10,
1944, published b y the American Newspaper Guild, New Y ork, 1944, and from union agreements on file
in the Bureau o f Labor Statistics.

military service, and 92 make provision for payment to beneficiaries
in cases of death in service. Both these requirements are considered
implicit in other Guild agreements, from the fact that dismissal pay
is provided for all employees who are discharged or die and a veteran
is considered as an employee until his services are dispensed with by
the employer or are terminated by death. A number of Guild agree­
ments credit all or part of the time spent in military service in com­
puting the total amount of severance pay, and a few give employees
the option of collecting severance pay before they enter service, while
still maintaining their reinstatement rights.
All the Guild agreements contain graduated plans in which the
dismissal payment is based on earnings and length of service. The
agreements most commonly specify a uniform relation between pay
and service, such as 1 week’s pay for every 6 or 8 months’ or year’s
service. (See Appendix, Example A.) Occasionally, dismissal pay is
determined according to a schedule allowing a specified number of
weeks’ pay for stated years of service, but changing the ratio of weeks
of pay to service at certain intervals. (See Example B.)
Slightly under 10 percent of the agreements establish no ceiling on
the amount of dismissal pay but allow pay based on the employee’s
total length of service. Most of the agreements, however, specify a
maximum allowance, ranging from 4 to 52 weeks’ pay, although about
three-fifths specify between 26 and 30 weeks, while some agreements
stipulate a maximum lump sum, ranging from $750 to $5,000. The
following shows the dismissal-pay maxima specified in Guild agree­
ments current as of June 1944.
Number of

4 weeks__________________________
5 weeks__________________________
10 weeks________________________
14 weeks_________________________
15 weeks_________________________
16 weeks_________________________
19 weeks____________________
20 weeks_________________________
22 weeks_________________________
24 weeks_________________________
26 weeks_________________________


Number of

28 weeks_________________________
30 weeks_________________________
34 weeks_________________________
43 }i weeks_______________________
52 weeks_________________________
$880___ ________ ________________
$ 1,000______________________________
No limit_________________________


One week’s pay is most commonly based on the highest salary re­
ceived by an employee during his employment with the company, or
the highest during the preceding 6 months or year. Some agreements
figure severance pay on the average weekly salary received during a
specified period (usually 6 months or a year) prior to dismissal, or,
less frequently, the employee’s current rate of pay.
About one-fourth of the Guild agreements, in addition to providing
dismissal pay, grant preference in reemployment to employees who
have been dismissed for reasons of economy, while a few agreements
extend this right to all employees dismissed except for cause. A few
agreements in the former group limit the right to preferential reem­
ployment to 1 year after the dismissal for reasons of economy, or
restrict it to Guild members. In most cases an employer may make
his own choice of the order in which he hires former employees,
although in others rehiring must be “ in priority order.” (See Ex­
amples A and B.) If rehired, future calculations of dismissal pay
would, of course, be based on service since the date of rehiring.


The International Typographical Union (A. F. of L.) recently
has made considerable headway in obtaining dismissal-pay provisions
in its agreements. By August 1944 the union had obtained such
provisions in 79 newspaper and 90 commercial-printing agreements,
covering about 7,500 workers.
Unlike the Guild agreements, dismissal pay in the Typographical
agreements is paid only for dismissals caused by suspension of business
or merger. With but a few exceptions, no service requirements are
stipulated, and the dismissal payment is the same for all employees
affected, regardless of length of service, amounting, in general, to
2 weeks.7

The United Office and Professional Workers of America (C. I. O.)
has organized employees in offices, graphic arts and related fields,
financial institutions and insurance companies, and nonprofit institu­
tions such as the social-service agencies. Altogether, 73 agreements
with dismissal-pay provisions negotiated by this union, all but a few of
which cover firms in New York City, were analyzed.8 Slightly less
than half of these agreements cover employees of private social-service
agencies and other nonprofit organizations, who are not covered by the
Social Security Act. Over a fifth of them cover office employees of
book publishers and distributors, and the others cover bank, motionpicture distribution, insurance brokerage, industrial office, and general
office workers.
Dismissal pay is generally allowed to employees dismissed because
of “ retrenchment or reorganization” (the reason most commonly
specified in the agreements covering nonprofit agencies), laid off be­
cause of lack of work, or discharged except for such specific causes as
drunkenness, dishonesty, insubordination, violation of company rules,
malfeasance, failure to maintain good standing under a maintenance of
union membership clause, or other specified causes. (See Examples
C and D.) Six of the agreements with nonprofit organizations,
including social-service agencies, specifically provide dismissal pay to
workers dismissed for “ incompetency,” or “ unsatisfactory perform­
ance of work,” and two agreements with book publishers grant dis­
missal pay to workers discharged for “ inefficiency” (in one case only
if the individual has been employed more than 5 years). Several
additional agreements provide dismissal pay to employees dismissed
“ for reasons of retrenchment or reorganization” and for “ other reasons,
except malfeasance.” Under these provisions, employees dismissed
because of inefficiency or incompetence probably receive dismissal
One agreement with an insurance firm extends dismissal pay to
employees who are forced to leave permanently because of ill health.
7 International Typographical Union Bulletin, August 1944 (p. 175) and union agreements on file in the
Bureau of Labor Statistics.
• In addition to dismissal compensation which is stated to be in lieu of a pension provision and to which
only employees with 3 years* service are eligible, one agreement with a nonprofit organization provides
weekly compensation in lieu of “ government unemployment compensation*’ to employees who have worked
with the organization for at least 1 year and who are laid off or discharged, except for reasons that the organi­
zation and union agree are cause for immediate dismissal. Benefits amount to $15 per week (or 50 percent of
the weekly salary at the time immediately preceding release, whichever is less) until other employment is
secured, provided the period of unemployment does not exceed 20 weeks. For those with less than 1 year of
service, the maximum unemployment compensation equals 4 weeks for each 3 months of service. It is further
added that employees released shall actually search for other work, accept any reasonable work offered, and
report their progress weekly to the organization.

In a few agreements, dismissal compensation is paid to employees
honorably discharged or laid off for more than a specified period— 30
days in two, and 3 months in two others. One of the agreements stipu­
lates that any employee who cannot be rehired on hr* return from
military service, because of retrenchment or reorganization during his
absence, shall receive dismisbal pay as of the date of his army dis­
charge, less the military severance bonus paid on his induction.
All but a few of these agreements with dismissal pay provide for
rehiring on the basis of seniority; four with film distributors provide
that employees subsequently rehired during the same calendar year,
after having received dismissal pay, shall not be entitled to the
vacation privilege. The others include no special arrangements except
that one, in which the dismissal pay is in weekly installments in
amounts not less than one-half of the employee’s wages, specifies that
such payments shall cease upon reemployment. All the other agree­
ments, except three, specify that the payments shall be in a lump sum;
under three the payment may be made in either a lump sum or install­
ments, as agreed among the employer, union, and employee, provided
the full amount is paid within the period for which the employee is
entitled to receive dismissal pay and provided no single installment
is less than the employee’s weekly wage. Five agreements, all with
film distributors, specify that the company may deduct necessary
taxes from the dismissal pay.
Seventy of the 73 agreements negotiated by this union provide
dismissal pay graduated according to length of service. In contrast,
three provide for fixed payments equivalent to a specified number of
weeks’ wages; two of these allow a maximum of 2 weeks’ pay to em­
ployees “ dismissed” or laid off, and the third allows regular profes­
sional workers 1 month’s pay and other workers 2 weeks’ pay if dis­
missal is caused by retrenchment or reorganization, while all em­
ployer ' receive 2 weeks’ pay if dismissed for incompetence. In two of
the three agreements, all regular employees are eligible; in the third,
employees must have 2 years’ service to be eligible.
One" week’s pay for every year of service is most frequently allowed
under the 70 agreements with graduated plans, although a few allow
2 weeks’ pay for every year of service. In a number of agreements
employees receive 1 week’s pay for the first 6 months’ service, and
2 weeks’ pay after 1 year’s service, but receive 1 week per year
of service thereafter. Two establish a ratio of 2 weeks’ pay for every
year of service if the cause of dismissal is “ retrenchment or reorganiza­
tion,” or “ reorganization,” respectively, but only 1 week per year of
service if the cause of dismissal is incompetence in the one case, and
retrenchment or other reasons, in the other. In about one-fifth of the
agreements with graduated plans, the dismissal compensation is
determined by certain service-year groupings. (See Example C.)
Only 5 agreements have minimum service requirements exceeding
1 year; one requires 1% years’ service and four, 2 years’ service.
In three of the latter group, the 2 years of service, are included in
calculating dismissal pay; in the fourth, 1 week’s pay is allowed for
2 years’ service and 1 week’s pay for every year of service of more
than 2 years. Fourteen agreements list no service requirements and
presumably all regular employees, i. e., those who have completed
their probationary periods, are eligible.

Seven agreements—six with social-service agencies and one with
a book publisher— establish two kinds of service requirements, de­
pending on the reason for the dismissal. In the six social-service
agreements, the service requirement for dismissal pay is 1 or 2 years
if the cause of dismissal is retrenchment or reorganization. In two
of these, employees dismissed for incompetence also receive dismissal
pay but only if they have 3 and 13 years’ service, respectively, while
in the other four, employees dismissed for reasons other than retrench­
ment or reorganization, except malfeasance, receive dismissal pay
only if they have worked for periods ranging from 3 to 5 years. (See
Example D .) In the seventh agreement, employees laid off receive
dismissal pay after 6 months’ service while those discharged for
inefficiency receive dismissal pay only after 5 years’ service.
The maximum dismissal allowance ranges from 1 week’s pay to an
unlimited amount, depending on length of service. About one-fourth
(19) of the agreements with graduated plans do not explicitly establish
maxima for dismissal pay but allow full payment based on the em­
ployee’s length of service in accordance with the graduated plan out­
lined in the agreement. (See Example D .) Twenty-six allow a
maximum of 1 month’s pay or less,9 6 allow maxima ranging from 6 to
10 weeks, 10 allow a maximum of 12 weeks’ pay, and 8 maxima rang­
ing from 14 weeks’ to 10 months’ pay.1 (See Examples C and E.)
The agreement, which provides that the dismissal wage shall be paid
at weekly intervals in amounts not less than one-half of the em­
ployee’s wages, establishes a maximum of $400.
Although the large majority of agreements provide dismissal pay
only for dismissals caused by business conditions, a few make no
distinction (in the amount paid) between dismissals for economy and
dismissals for other reasons, including, in seven cases, incompetence,
inefficiency, or “ unsatisfactory performance of work,” while others
provide varying amounts, depending on the reason for dismissal*
Seven agreements with social-service agencies pay more when dis­
missal is caused by retrenchment or reorganization than when dis­
missal is due to other reasons, except malfeasance. In two of these
cases the difference amounts to 2 weeks; in two others, 4 weeks;and
in the remaining three, 8 weeks. Another agreement allows employees
a maximum of 1 week’s pay when laid off and 2 weeks’ pay when
dismissed because of a “ decline in business operations.”

Agreements in industries other than those discussed above furnish
only scattered examples of dismissal-pay clauses, although several
cover comparatively large companies. Thirty-four such agreements
are on file with the Bureau of Labor Statistics 1 covering approxi­
mately 100,000 in the following industries: Chemicals, electrical
machinery, film processing, gas utility, laundry, machinery, nonferrous-metal smelting and refining, petroleum, news services, pro• One agreement requires 2 weeks’ notice of dismissal to employees with less than 15 years’ service and
1 m onth’s notice to employees with longer service. If the employee finds another job during the period of
notice, he is released and his pay continues to the end of the notice period.
i° Under one of these, which allows a maximum of 26 weeks’ dismissal pay, in the event of the com pany’s
dissolution, the agreement stipulates that the employer will be responsible for paym ent only to the extent
of the firm’s assets.
» This report does not include a street-railway company agreement which might be interpreted as provid­
ing dismissal pay to older employees displaced b y reason of technological development. This agreement
provides that streetcar operators with 15 years’ service who are “ unable to continue at work b y reason of
the installation of one-man streetcars shall be retired from service” and paid a m onthly pension of $65 until
the age of 65.

fessional and scientific instruments, radio and telegraph, rayon yam,
telephone, and textiles. Among the important companies which
pay dismissal compensation under the terms of union agreements 1
are the Sinclair Oil Corp., National Carbon Co., American Viscose
Corp., Postal Telegraph-Cable Co.,1 Northwestern Bell Telephone
Co., Celanese Corp. of America, Michigan Bell Telephone Co.,
Associated Press, and United Press (press telegraph operators).
Two-thirds of these agreements cover wrorkers paid by the hour,
while the others cover salaried employees. In twro cases the agree­
ments are limited to technical and laboratory workers, and agreements
covering production workers in these two plants do not contain dis­
missal-pay provisions.
Dismissal compensation is generally paid, under these agreements,
to employees terminated or laid off “ through no fault of their own/*
or who are laid off or discharged “ except for just cause,” or who are
laid off because of “ reduction in staff.” (See Examples F, G, % H.)
Under one agreement, dismissal pay is allowed to employees released
because of “ shut-down or discontinuance of any department or type
of work or manufacture, or by reason of the conversion of the nature
and type of machines used or articles manufactured.” This same
agreement allows dismissal pay to workers entering the armed forces.
Under another, with a large company engaged wholly in war contracts,
employees “ laid off for lack of work” receive dismissal pay only if the
employer is “ notified by the governmental authorities that severance
pay can be set up as a charge against Government contracts.” In
another agreement, all employees who are “ in good standing with the
company and the union and of necessity must be laid off by the
company” receive dismissal pay.
One of the agreements, with a gas company, also allows dismissal
pay to employees who resign, while another provides for payment
(less legal costs or expenses) to beneficiaries of employees except
those who die while on leave of absence granted at their request.
Abandonment of the plant cancels the obligation to pay dismissal
compensation under one agreement, while in another, the provision
does not apply if employees are given at least 10 days’ notice before
lay-off becomes effective.
‘Six of the agreements, covering about 45,000 workers, limit dis­
missal payment to displacements resulting from mechanization or
technological changes,1 although one of these further provides that
an employee separated from employment because of physical dis­
qualifications is entitled to the same separation allowances as paid
by the company to employees technologically displaced.1 Under
one agreement, honorably discharged veterans who are unable to
resume their former employment because of “ physical or mental
disability” receive dismissal pay.
The great majority of the agreements provide for rehiring of laidoff or dismissed workers on the basis of seniority. Waiver of re­
employment rights based on seniority, upon receipt of dismissal pay,*
i* Several agreements of one company which refer to existing company policy on “ termination allowances”
grant the company the right to terminate or m odify the plan at any time, and have therefore been excluded
from the analysis. This plan was the only one in which age was a factor in determining the amount of dis­
missal compensation.
** Although this com pany has recently merged with Western Union, this agreement is still operative.
h One of these, with a telegraph com pany, limits to 250 the number of those who may be dismissed because
of mechanization. Another agreement in this industry, on the other hand, prohibits dismissals during
the life of the agreement “ because of mechanization or technological changes.”
w B y Directive Order of the National W’ar Labor Board, March 24, 1943.

is expressly stipulated in five agreements with gas, rayon-yarn, and
radio and cable companies which allow employees facing dismissal
to accept either furlough with retention of seniority rights, or dis­
missal pay with cancellation of earned seniority. (See Example I.)
Employees who are furloughed may later waive reemployment rights
by accepting dismissal compensation.
Half of the agreements with dismissal-pay provisions define “ a
week’s pay” as an amount equal to the employee’s regular rate or
average earnings multiplied by the hours of the basic workweek.
Three agreements with news-service companies, on the other hand,
stipulate that dismissal pay shall be based on the employee’s “ highest
regular weekly salary,” and one provides a week’s “ full wages.”
Under one agreement a week’s pay in the case of an employee nor­
mally working varying hours is defined as an average of the weekly
earnings, excluding overtime, differentials, and other special pay­
ments, “ over a period sufficient to be representative of the employee’s
normal schedule.”
Twenty-eight of the 34 agreements provide for dismissal pay
graduated according to length of service, 5 provide a fixed number
of weeks’ wages, regardless of length of service beyond the qualifying
period, and 1 provides for an “ amount agreed to by the union and
Of the five agreements which provide dismissal pay for a fixed
number of weeks, three provide for 2 weeks’ pay and two for 1 week’s
pay. Three specify minimum periods of service of 6 months, 1
year, and 2 years, respectively; the others make no reference to
service eligibility requirements although presumably only regular or
permanent employees are eligible. (See Example G.)

Graduated-Pay Plans
All of the 28 agreements with graduated plans establish minimum
service requirements for dismissal pay, ranging from 30 days to 5
years, although about one-half specify 1 year; one agreement, with
a telegraph company, limits dismissal pay to employees hired within
the 18-month period prior to the effective date of the agreement.1
Although about a fourth of the agreements provide compensation
at the rate of 1 week’s pay for every year of service (Example I), most
of the other plans vary widely in the relationship between pay and
service (Example F). In four cases, including two agreements of
one company, pay is computed by days, based on months of service;
in the others, dismissal pay is computed in multiples of a week’s
pay, based on years (or fraction thereof) of service.
About three-fourths of the agreements with graduated plans es­
tablish a maximum allowance ranging from 40 hours’ to 26 weeks’
pay, according to length of service. One allows a maximum of 40
hours’ p a y ;1 9 allow a maximum of 2 weeks’ pay; 1, a maximum
of 3 weeks’ pay; 1 allows 1 month’s pay and 2 allow 4 weeks’ pay;
2 allow a maximum of 10 weeks (one of these also provides 2 weeks’
dismissal pay upon resignation); 1 a maximum of 16 weeks; and 3,
covering press telegraph operators employed by press services,*
lfi In one of these agreements, the service eligibility requirement “ for military replacement employees*
is 2 years; for other employees, 6 months.
1 Under this plan, employees dismissed after 1 year of service receive 3 days’ pay of 8 hours each plus 1
day's pay of 8 hours for each additional year of service, up to a maximum of 40 hours.

26 weeks.1 One agreement with an oil refinery provides for a flat
payment of $10, instead of pay equal to a week's wages, for each
year or fraction of service with the company subsequent to a speci­
fied date upon termination of employment or when laid off for more
than 30 calendar days. This agreement also stipulates that “ total
severance payments received by an employee over a period of years
shall not exceed $10 for each calendar year, or part thereof, he has
been in the employ of the company. . .'' The other 7 agreements
do not explicitly establish maxima for dismissal pay but allow full
payment based on the employee's length of service. (See Example I.)
Three agreements, two with telephone companies and one with a
metal-products company, specifically provide for refund of part of
the dismissal pay if the worker is rehired within the period covered by
such payment—the former two of these by pay-roll deductions at the
rate of 10 percent of the employee's weekly earnings.
One agreement, with a gas utility, provides for the deduction
from dismissal pay of an “ amount equal to the weekly payment to
which the employee might become entitled were he presently eligible
to receive weekly payment under the unemployment-compensation
law of Ohio, multiplied by the number of years of his service less 3
years, which multiple shall in no event exceed 7." Under this agree­
ment, therefore, employees with less than 3 years' service receive
full compensation on dismissal, but those with more than 3 years'’
service receive as dismissal compensation the difference between
a full week's pay and unemployment-compensation benefits.

Appendix.— Sample D ism issal-Pay Clauses
E xample A
Any employee dismissed shall, at his request, be given notice thereof in writing,
giving the reason or reasons for his dismissal, and shall be compensated for such
dismissal as follows:
The rate of dismissal pay shall be as follows: If at the time of dismissal the
employee has been in continuous service of the publisher and in the department
from which dismissed more than 3 months, but less than 1 year, 1 week’s salary;
for every year of continuous service < f 1 year or more, up to 16 years, 1 week’s
salary for each year. But the total of all dismissal pay shall not be more than
16 weeks’ salary. The highest rate of pay the employee has received from the
publisher during the preceding year shall be the basis for dismissal pay.
Dismissal pay need not be paid to any employee who deliberately neglects
to fulfill his duties or who provokes discharge for the purpose of collecting dis­
missal pay. It is further agreed that in case of a dispute over this clause, the
matter shall be submitted to a joint standing committee of two representatives
from the publisher and two from the Guild for a decision. Nothing in this clause
shall apply to anyone employed 15 years or more by the publisher.
In the event of the death of an employee the publisher shall pay to his de­
pendents an amount equal to the amount of dismissal pay to which the employee
would have been entitled. The employee shall have the right to designate which
dependent or dependents shall, as beneficiary, receive the dismissal pay in event
of death of the employee.
When a vacancy, caused by dismissal to reduce the force, is filled within 1
year after said dismissal, said dismissed employee shall be rehired for the position,
rovided said employee is an applicant for said position and it is the same work
e was doing before being dismissed, or is other work in the department, that
in the judgment of the publisher, said dismissed employee is capable of filling
to the satisfaction of the publisher.


1 In two of these cases the parties have negotiated a new agreement providing a maximum of 30 weeks*
dismissal pay, at the rate of 1 week’s pay for every 6 months* service. These agreements are before the
N ational War Labor Board, for its approval.

E xample B
All employees dismissed for economy, who are members of the Guild at the
time of dismissal, shall be placed on a list for rehiring and shall be rehired in
priority order before any others may be hired for employment within the various
divisions * * *.
Employees dismissed shall be compensated immediately in a lump sum as
Number o f
weeks* pay

Number of
weeks* pay

6 months and less than 1 year____
1 year and less than 2 years______
2 years and less than 2% years____
2% years and less than 3 years____
3 years and less than 3% years____
3 }' years and less than 4 years____
4 years and less than 4)4 years____
4)4 years and less than 5 years____
5 years and less than 5)4 years____
5% years and less than 6 years____
6 years and less than 6% years____
6% years and less than 7 years____


7 years and less than 7)4 years____
7)4 years and less than 8 years____
8 years and less than 8% years____
8)4 years and less than 9 years____
9 years and less than 9)4 years____
9)4 years and less than 10 years—
10 years and less than 10% years_
10% years and less than 11 years—
11 years and less than 11% years—
11% years and less than 12 years_
12 years and less than 12% years_
12% years and over___ ___________


It is agreed that the publisher may deny severance pay in dismissal for gross
dishonesty. In case of discharge for cause other than gross dishonesty the
employee shall be entitled to severance pay. In the event of the death of an
employee, the amount of his severance pay shall be paid to his beneficiary or
his estate, less any legal costs or expenses caused to the publisher in making
such payment.

E xample C
In case of slack business, where it becomes necessary to dismiss workers, such
employee shall receive in addition to the 2 weeks’ notice:
1 week’s severance pay for 1 to 5 years that he shall have worked for the
2 weeks’ severance pay for anything over 5 years, and up to 10 years.
3 weeks’ severance pay for anything over 10 years, and up to 15 years.
4 weeks’ severance pay for anything over 15 years, and up to 20 years.
6 weeks’ severance pay for anything over 20 years, and up to 25 years.
8 weeks’ severance pay for anything over 25 years, based on the weekly salary
that he shall have received at the time of such severance.

E xample D
Separation allowance.— In addition to vacation salary a separation allowance
of 1 week’s salary for each year of service shall be paid to staff members who
are dismissed for reasons other than retrenchment if such member has been
employed by the association for 4 years or more.
In addition to vacation salary which has accumulated at the time of dismissal,
a separation allowance of 1 week’s salary for each year of service shall be given
to the worker dismissed for reasons of retrenchment or reorganization.
A person dismissed for malfeasance forfeits all privileges relating to notice,
vacation, and separation allowance.

E xample E
Any employee who is discharged for any reason except dishonesty, drunkenness,
insubordination or violation of the company’s rules (provided such rules are
reasonable and equally applied to all employees), shall be given severance pay
as follows: For employment up to 1 year a sum at the rate of 1 week’s pay; 1
to 2 years, 2 weeks’ pay; after 2 years, 1 week additional for each year of service,
but no employee shall receive more than 12 weeks’ severance pay. Company
shall have the right to deduct necessary taxes from severance pay. Any employee
who has received severance pay and is subsequently rehired during the same
calendar year shall not be entitled to the vacation privilege.

E xample F
Severance pay for employees laid off on account of reduction in force shall
be in accordance with the severance-pay schedule attached hereto. Length
o f „service of rehired employees shall be computed for purposes of severance pay
from their last reemployment date.
Under 3 months1 service— No allowance.
3 months and under 1 year of service— Same proportion of 1 week's pay as
completed months of service are of 12 months.
I year and under 3 years' service— 1 week's pay.
3 years, and under 5 years' service— 1J4 weeks' pay.
5 years and under 7 years' service— 2 weeks' pay.
7 years and under 10 years' service— 3 weeks' pay.
10 years' service— 4 weeks' pay.
II years and over— Same as for 10 years plus one-half week's pay additional
for each additional year of service.

E xample G
The company agrees that when terminations are made for reasons other than
cause, whenever reasonably possible to do so, the company will give the employee
affected 2 weeks' notice of the intended termination or pay in lieu thereof.
The company will pay severance pay equal to 1 normal week's pay (i. e.,
40 hours) upon termination of an employee who has had 6 months or more
of continuous employment with the company. If an employee is discharged
for cause or for failure to maintain good standing with the union, he shall not
be entitled to severance pay.

E xample H
Except for part-time employees, severance pay shall be granted by the employer
in cases where lay-offs occur for periods of 2 weeks or more in accordance with
the following provisions:
(a) If the period of most recent employment is 1 year but less than 5 years—
5 days' severance pay.
(b) If the period of most recent employment is 5 years or more— 10 days'
severance pay.
“ Day's pay" for this purpose shall be based on the normal 8-hour day, not
including overtime or night-shift bonus.
No severance pay will be allowed for lay-offs of less than 2 weeks' duration.
Employees laid off because of lack of work will be given the opportunity to
return to their former jobs on the basis of seniority, provided they return to
work in accordance with the provisions of this agreement.

E xample I
The company and the union agree to the following definition of a technological
Any employee classified as a permanent employee shall be considered displaced
by a technological change when his or her services shall no longer be required
as a result of a change in plant or equipment, or a change in a process or method
of operation, diminishing the total number of employees required to operate
the department in which he or she is employed. The term shall not include
lay-offs caused by denier changes, business conditions, variations in customers'
requirements, shut-downs for plant repairs, or other temporary or seasonal
interruptions of work.
The following provisions shall be applicable wherever a displacement shall
have been occasioned by any technological changes as above defined:
1. Any employee classified as a permanent employee in a related department
affected by the technological change shall similarly be considered as displaced
by a technological change when the total number of employees required to operate
the department in which he or she is employed has diminished as a result of
the change * * *.
A displacement wage shall be paid to such employees so displaced, which
displacement wage shall be in an amount equivalent to 1 week's pay for each
fu ll year of the employee's past continuous service with the company * * *

Within 60 days after displacement, a technologically displaced employee shall
elect to be placed on the plant’s furlough list or accept a displacement wage.
Such election shall be final and be made in writing. The failure of a displaced
employee to deliver such written election to the company within the afore­
mentioned period of 60 days shall constitute an acceptance of the displacement
wage, which displacement wage shall thereupon be promptly paid by the company
to such employee * * *.
Notices shall be posted in the department affected by an impending displace­
ment, inviting such employees, as may desire, to surrender their seniority rights
and rights to recall, in exchange for displacement wages. Such employees shall
inform the head of that department of their decision within 7 days after posting
of impending displacement lists. For each senior employee applying for dis­
placement wages, the company will retain a junior employee who would otherwise
have been displaced by the proposed technological change.
Should an employee displaced by technological change accept a displacement
wage and thereafter be reemployed by the company, he shall accept such
reemployment as a new employee, at the 3 months’ rate * * *.