[otoburb]

>>This can lead to weirdly misaligned incentives, like C-level executives on a failing company trying to get fired because their severance package will leave them better off than staying with the sinking ship.

If anybody is fired in the U.S. they are almost always never entitled to severance. Severance is primarily available for employees who have been laid off. Such companies would love to fire executives in the true sense of the word if they had cause to save on any costly packages.

[btilly]

A contract can say whatever it says. If it says that in event of your being asked to leave the company that you get 6 months salary, then you get 6 months salary upon being asked to leave. Regardless of why you're asked to leave the company.

This kind of contract term is not given rank and file employees. But I personally know executives who have been fired and kept a salary because it was in their contract, including one who was fired in the last year, and another who maneuvered to get fired a few years ago because the company was going out of business.

[analog31]

There can be a lot of confusion about what "fired" means. Most US states have "employment at will," meaning that there is no implied contract, and an employee can be terminated without giving a cause. Yet in the common parlance, "fired" means "terminated with cause." If an employee has been terminated with cause, they know it.

Also, companies avoid the term "layoff" because it could imply that an employee is entitled to be re-hired if business conditions improve. This can be the case in union shops. The term I've heard for a permanent termination without cause is "reduction of force."

Companies have to be careful about using "with cause" because they can get sued over it unless they absolutely have all of their ducks in a row. They will often pay the severance rather than expose themselves to a lawsuit and discovery process. They may also wait until there's a downturn, and get rid of the low performers all at once.

Of course like you say, if there's a contract, it can say anything.