I currently work for a major IT outsoursing company (Company A) and work on an account for a major telecommunications company (Company B). We recently lost our contract here due to yet a third company (C) buying out (B) and my particular job will be taken back in house by Company (C). I hope to simply be picked up by the telecommunications company (C) during the transition. My concern is that we have been told by our present employer (A) that if we interview with the telecommunications folks (C), and if (C) offers us ANY job at ANY salary, we will lose our severance package with Company (A) regardless of whether or not we accept. Can they do this? And does (A) have any right to know if or when I interview with (C) and whether I've been made an offer?
Thanks. I know this is a bit confusing.

First, they have no legal obligation to offer you severance at all.

Second, severance is not intended to be a financial windfall, but a way to get you through a period of unemployment that you had no control over.

If you turn down work, you are unemployed by your own choice.

If you are offered work and accept it, then you are not unemployed.

Few if any employers would offer severance in either situation.

That is a fairly standard arrangement and yes it is legal. Severance isn't required so if you have the option of choosing some employment over no employment, your employer has the option not to pay severance.

Thanks for the quick response. So sounds like, unless I know ahead of time what job I might be offered and what the salary is likely to be, I'd be gambling my severance and unemployment eligibility against a job that COULD be half of my present income anyway. Don't think I like the odds.