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Negotiating a severance agreement: know your rights and form a strategy

February 9, 2023 james radford

With layoffs dominating the news (and likely your LinkedIn feed), severance is top of mind for many employees right now, even if they have yet to face a sudden cut. Even employees who are terminated for performance may be asked to sign a severance agreement that contains a general release of claims.   

While severance pay isn’t a given—the Fair Labor Standards Act (FLSA) doesn’t require companies to provide it—many businesses choose to do so. It’s a way to soften departures for valued employees, manage the company’s reputation and head off potential employment lawsuits. In exchange for some clearly defined benefits, including pay, insurance coverage or even strong references, companies ask employees to release them from future litigation, sometimes also throwing in non-compete or non-disclosure agreements.  

Because both the departing employee and the company stand to gain from the agreement, there is the potential for negotiation. Unfortunately, employees don’t always realize this. In an effort to quickly secure what they can, many leave money or other benefits on the table, limit their future prospects with onerous non-competes or cut off the possibility of a valid employment lawsuit.  

So, what are your rights when it comes to severance negotiations, and how can you move on with your career in the most positive way?  

Don’t feel pressured to sign immediately 

It’s easy to feel blindsided by a separation. But while your computer may suddenly be disabled and your badge frozen, that rushed feeling of finality shouldn’t extend to your severance negotiations. It’s always a good idea to take some time to process the news, move past the immediate shock and really examine the package your company presents.  

If you are over 40 years old, the Older Workers Benefit Protection Act ensures that you have 21 days to consider a severance agreement, then 7 days to change your mind after signing. If you are part of a reduction in force (mass layoff), you have 45 days to consider. Consequently, many companies use at least the 21-day waiting period as a standard for all departing employees.  

While you may wish to confirm the timeline with HR during your termination meeting, don’t feel obligated to sign anything on the way out. You should always have time to call an employment lawyer and schedule a severance agreement review.  

Consider the terms of your dismissal 

While some layoffs may leave you in the company of thousands of your coworkers, others feel more personal. Look back on your employment and your dismissal. Do you feel you may have been the victim of discrimination, because you are a racial minority with your employer? Do you feel your sex was a factor because of sexist comments made by members of management? Did you request a medical accommodation, or medical leave shortly before being fired? Did you speak up against discrimination, and now you feel you are suffering retaliation? 

If so, you have legal rights to have these concerns investigated by the U.S. Equal Employment Opportunity Commission (EEOC), and the right to bring a lawsuit if you have evidence to support your claim. Before waiving these valuable rights, you need to ensure the severance offered is adequate consideration. 

During a severance package review with an employment attorney, you can discuss your dismissal and talk through your options. Pursuing litigation is never easy, but sometimes it’s the right choice. Signing your severance package closes that door definitively.  

Negotiate your pay, but also look beyond it 

Some companies adopt a standard severance package offering about two weeks of pay for every year you’ve worked—more if you’re a manager or executive. Pay is a straightforward place to negotiate. 

Aside from pay, however, you’ll want to examine the following: 

  • Accrued vacation time: If your PTO balance is in the positive, you could request this is paid out separately from your negotiated severance pay. In Georgia, your employer is not legally obligated to pay your unused PTO balance, but it can be a good negotiating point. 
  • Health benefits: Many companies are required to offer COBRA benefits, allowing you to stay on the company insurance plan for up to 18 months. Because you have to carry the employer’s cost plus your own premiums, this can quickly eat up your budget. Talk to your employer about covering their share of the costs until you find a new job—especially if you have known healthcare needs.  
  • Stock options and retirement plans: Company policies differ a lot here. Ask for policy documents in your meeting, then review them with a Georgia employment lawyer before you sign.  
  • Perks: If you enjoyed airline elite status, a subsidized gym membership or the use of a company car, check to see if your employer includes them in your package. Like pay, it doesn’t hurt to ask your employer to extend perks until you find your next position. 
  • Outplacement services: Businesses sometimes offer career counseling or coaching to help smooth employee transitions. If you were in a high-growth stage of your career or you’re ready to try something new, check to see if these are included.  

Be careful with non-compete agreements 

Pay, insurance and extended perks can all help ease your transition into a new role. But if your package includes a non-compete agreement that limits your ability to work in your field, you’ll struggle in the long run. Have your employment attorney review any confidentiality clause, non-disparagement clause, cooperation clause or non-solicitation clause, especially if you plan to stay in a similar field, local market, or start your own business. 

Ask for what you need 

While a layoff might leave you feeling retrospective—looking back on your job and what you brought to the company—it’s also a great time to consider your future and what you value most. In addition to speaking with an employment lawyer, you may wish to schedule a career counseling session to get a sense of your prospects and the timeline for landing a new job, furthering your education or switching careers.  

Once you have at least a rough sense of where you’re going, ask your former employer for what you need most. If you’re expecting a baby, maybe that’s a lump payment and extended healthcare coverage. If you expect to secure a new job soon, you might want continued perks and an adjusted departure date. If you’re switching careers, coaching and distributed payments that lessen your tax burden might make more sense. 

Manage your reputation 

Today, many employees are more open about job loss, understanding the power of networks and the cyclical nature of hiring and firing. But that doesn’t mean you can’t finesse your exit as a part of your severance negotiations. If you’re at the executive or management level, consider the planned communications about your departure. Will you be able to review or offer quotes? Will your company presence, especially your bio, stay live online while you look for a new job? Will you be able to expect a reference?  

As you move on to your next role, keep tabs on your own achievements. It’s helpful to have a record of what you’ve accomplished if you ever find yourself in severance negotiations or considering an employment lawsuit. Downsizing can happen at any time, and it’s a good idea to stay ready—no matter how much you enjoy your work or feel confident in your company’s stability.  

Schedule your severance agreement review with Radford & Keebaugh   

If you’ve been laid off, give us a call to set up a severance agreement review. We’ll let you know what’s expected in a fair severance package, and we’ll help you identify where to negotiate. Contact us today to set up your severance review.  

 

 

Employment Discrimination, Uncategorized, Wrongful Termination

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