Understanding severance packages: we hope you don't ever need it, but here's how to equip yourself for some bad news.
And then you hear those dreaded words: "We've decided you will not be working here anymore." There is no discussion. No debate. And only 15 minutes after the meeting began, you are handed a packet of papers, told to review and sign them within a certain time period in order to receive a severance package and then leave your workplace forever.
Now what? If you should face any circumstance like this unfortunate scenario, there are a number of things you should take into consideration as you contemplate your next steps. Most importantly, remember to put emotion aside. If you are an "at-will" employee, your employer is not required by law to even provide you with a reason for the separation. Instead, take a deep breath and think rationally - about everything related to how you can garner the best severance package possible.
What do I do?
A few important steps should be followed in any severance situation:
1 Understand that a severance agreement is like an insurance policy for the employer. The company is paying you to make sure you will not sue them. They want a permanent separation from you to minimize the likelihood of any future unpleasantries. Once you understand what your former employer has to gain from you signing the agreement, you have taken the first step toward handling the situation.
2 Find a qualified employment attorney to review the documents. Although many attorneys do some employment law work or are highly skilled in litigating employment cases, your best resource is someone who writes severance agreements for employers (and does not have a conflict) and who is not just looking for a plaintiff for his or her next lawsuit. You need advice that best suits your needs.
3 Recognize that litigation may not be the best course of action, but the tacit threat of it can be beneficial. You may be angry and hurt, wanting to file any viable lawsuit in retaliation, but litigation is a very lengthy and arduous process, not necessarily in your or your family's best interests. Treat this like a business negotiation.
Can I Negotiate a Better Severance Package?
Maybe. The unspoken threat of a lawsuit is the best bargaining chip you will have to negotiate an enhanced severance. Once you commence litigation, the dynamics change dramatically. There are several things to keep in mind when contemplating how to approach a severance negotiation with the help of your legal counsel.
Don't limit yourself to items listed in the agreement. If you are part of a large reduction in force with a written severance plan, negotiating higher severance pay can later cause problems for the employer. Consider asking for items not specifically addressed in the formal severance plan, such as outplacement assistance, a positive reference and others highlighted below. Employers have more leeway in adding such items than deviating from set norms.
* There is no rule of thumb for severance amounts - anything from one week to three months is not unusual.
* To sign or not to sign a "new" non-competition agreement is your choice. If you currently are not subject to a non-compete and are now being asked to sign one as part of your severance package, consider your options. Your best option may be to start your own competing business. Keep in mind that a properly drafted non-competition agreement is very enforceable.
* Identify areas where the employer is likely to make concessions and address them. Common considerations include:
* amount of severance pay
* length of company paid health care coverage
* outplacement assistance
* method of payment (opt for a lump sum payment rather than continuation of pay)
* withholding of taxes
* less restrictive language
* positive reference
* employer agreement not to contest unemployment insurance claim
* payout of commissions due
* payout of unused sick/vacation time.
Treat your severance discussion like an arms-length business negotiation. Minimize emotions, and your chances of bettering your severance package are enhanced. Plus, you leave a favorable impression with your employer, and that never hurts.
Ardrey T. Tomkiw is partner at Tomkiw Dalton, PLC.
RELATED ARTICLE: What's in a Severance Agreement?
Before you consider negotiating, it's important to understand what exactly is a severance agreement. While there is no standard severance agreement, several elements are common across most documents:
* Formalities of making the document a binding contract, hence the reason for severance pay.
* Full and thorough release of any and all claims you may have against the company.
* Non-disparagement provision, stating you will not say anything bad about your former employer on the public record.
* Non-disclosure provision, so you do not discuss your agreement with others, in case yours is different.
* Confidentiality provision, so you do not disclose proprietary company secrets.
* Re-affirmation of your existing non-compete agreement, or a new and improved" non-compete agreement.
* Cooperation clause in the event the company is involved in future litigation over some project you worked on. Make sure the document addresses who pays for your time and how much time you will be expected to devote.
* Provisions that comply with the Older Workers Benefits Protection Act. If you are over 40 years of age, you should be:
* Advised to seek legal counsel;
* Allowed 21 or 45 days to consider the document before signing it;
* Seven days to revoke your decision to sign the document; and
* Provided data about others who were impacted by the reduction in force, including their position and age.
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||HOW DO I|
|Author:||Tomkiw, Andrey T.|
|Date:||Jun 1, 2009|
|Previous Article:||Global business exchange: chamber members provide fellowships to women from the Arab world.|
|Next Article:||YP engagement in the political process: Fusion members got to interact with legislators during the Mackinac Policy Conference.|