I realize one possible misconception is severance vs "gardening leave" [0].
They look really similar, but legally entirely different.
In "gardening leave" you're still an employee and on payroll until the last day. Whereas severance you're not an employee and typically paid lump-sum (but doesn't matter for this discussion). So in this specific situation, yes, that would be wages and would be paid out first before creditors because you are _legally_ entitled to those wages.
The problem of course you cannot hope to put a whole company on "gardening leave" in hopes that it can "act as severance" for everyone. Your creditors will sue you and easily win. They'd probably put an emergency injunction on the company and remaining funds before the first month was even completed once they learned of "creditors hate this one little trick!"
You have X months notice ie the company has to tell you X months before yoir severance date.
Often the company will want somone they let go out of the office ASAP.
Thus you spend your X months on gardening leave paid as normal wages.
On your severance date you get your redundancy package - in the UK there is a defined minimum but in some markets e.g. finance they pay more as they do want to keep current employees happy so they see that they just don't get thrown out.
As much of the US is at will employment I doubt this scenario will occur often
It can happen during a partial acquisition where the relevant employees are likely to cause damage to or steal the product/property before the acquiring company has finished the acquisition (e.g. software with wide access that needs to be untangled).
The usual one I hear about is someone who’s in generally in good standing and who has a significant stock award coming, but who just isn’t “working out” and management gives them the gift of finishing out their term to get the bonus
It's not the way it is calculated. All payments attached to employment contract are wages, be it regular salary, bonuses, vacation pay or severance. Say the contract defines severance of 1 month for each full year worked capped at 3 months: at the moment contract reaches 1 year anniversary, the employee should be owed 1 month worth of severance upon contract termination
I've worked in the sf tech industry my entire career and my employment contracts have never included guaranteed severance. I've seen severance being paid out to fellow employees but afaik it is done as courtesy and wasn't legally required.
> my employment contracts have never included guaranteed severance
My assumption was that we would not be talking about "unpaid severance" if there was no severance defined in the first place.
> Are you European? Maybe it's different there.
Generally severance is not legally mandated, but can be mandated under some specific circumstances, e.g. no-notice termination. Usually it is similar to US: either defined in collective (union) agreement or part of termination contract.
Well your assumption is wrong. There was no defined severance, people are saying that Convoy should have paid severance anyway because its the “right thing to do” when laying off employees. And others are saying they couldn’t because of creditors coming first.
They look really similar, but legally entirely different.
In "gardening leave" you're still an employee and on payroll until the last day. Whereas severance you're not an employee and typically paid lump-sum (but doesn't matter for this discussion). So in this specific situation, yes, that would be wages and would be paid out first before creditors because you are _legally_ entitled to those wages.
The problem of course you cannot hope to put a whole company on "gardening leave" in hopes that it can "act as severance" for everyone. Your creditors will sue you and easily win. They'd probably put an emergency injunction on the company and remaining funds before the first month was even completed once they learned of "creditors hate this one little trick!"
[0] https://en.wikipedia.org/wiki/Garden_leave