By Liz Swedock
Most at-will employees who have been recently terminated are given a “Separation” or “Severance” offer from their (now) former employer, in the form of a contract (or packet). This post is intended to give you a few pointers of what to look out for in such agreements.
Remember – this is not legal advice for the individual! This is just a general guide for common issues we encounter. If you have any specific questions about your own separation contract, please call us!
1. Think of your separation/severance offer as a negotiation.
Most employees are not entitled to severance. There is no such thing as legally required “two weeks” pay or anything like that. However, most of the time employers offer terminated employees severance anyway.
Why do they do this? Because they want you to sign a legal release, which is a contractual agreement that you are waiving any rights or grounds you might have to bring a lawsuit against your employer. Your separation/severance packet is this legal release.
So, what does this mean? It means they are offering you something because they want you to sign that release. This is a tit-for-tat. Don’t be afraid to ask for more before you sign.
2. Review what you are being offered – usually money.
As noted, often at-will employees are not legally entitled to a specific amount of severance from their employer. The first element you should think about, before you sign, is whether they are offering you enough in exchange for what they want from you – that legal release.
There might also be other components in your separation/ severance offer, such as continuation of health care or other benefits, or stock vesting. Start by reviewing your agreement carefully to see what they are offering you.
3. Confirm that you are being offered everything you are entitled to.
Review your employee handbook and any other documents you signed at any point during your employment, whether when you first started or while you worked there.
You are always entitled to be paid out for any accrued sick time, vacation time, or any other form of PTO your company offers. You are also entitled to any earned wages, typically referred to as your “last paycheck.” You must be paid for all this time by your next usual pay period.
Review your documents to confirm whether there are any contractual or established policies regarding termination, separation, or severance. For example, your employer might be required to provide you with a notice period before they can terminate you. This might be days, weeks, or months. A notice period could be detailed in your individual employment documents, or in your company’s general documents, such as the employee handbook.
4. Ask for a copy of your personnel file – you are legally entitled to it.
All you need to do is send an email. It could be to HR or your own supervisor. Your personnel file will contain all of the documents you signed with your employer, so this can be particularly useful when you have been employed for a while and can’t remember if you kept copies of everything.
5. Confirm whether you have an ERISA group benefits plan which could include severance benefits.
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry. Sometimes employers also utilize ERISA plans for severance benefits.
If you are unsure, ask your employer and there is also a free website where you can search for your company name – https://freeerisa.benefitspro.com . You have to make an account, but it is actually free.
6. Consider whether you might have any legal claims against your employer.
If you have a valid legal claim against your employer, this is a huge source of leverage as you negotiate your separation/ severance offer.
Remember, (most of the time) this is a pretty simple exchange. They are offering you something (usually money) in exchange for your agreement to drop any potential legal claims you might have, even if you don’t have any. This boils down to mean that they are potentially offering you free money in exchange for nothing if you have no legal claims. Employers do this simply for peace of mind (and sometimes for reputational reasons in the industry).
If you do have a legal claim, that can be a game-changer in a separation negotiation. At that point, you have to consider the elements on a scale – the value of your legal claim on one side, against the value of the legal release your employer wants, on the other side. Bottom line, it means your company might be willing to offer you much more separation/ severance pay in exchange for you signing the legal release.
If you think you might have a claim, we encourage you to call us to discuss.
7. Request to be released from any non-compete, non-solicit, or other restrictive covenants (if any apply to you).
If you are subject to any type of non-compete, non-solicit, or other restrictive covenants, now is the time to request to be released. Remember – these are simply contractual agreements, and your employer can agree to release you at any time. Even if your employer is not legally required to release you, they are often willing to discuss the option, and/or might agree to reduce the restrictiveness of such covenants. This is part of the negotiation.
Even if such covenants are not spelled out in your separation/ severance offer – they might still apply to you if your separation/ severance offer “incorporates by reference” a prior contract. Sometimes, if an employee signed a non-compete while they were employed, the separation/ severance offer might say something like “Employee agrees that Employee’s Employment Agreement is expressly incorporated by reference into this Agreement as if set forth fully herein.” This means that every single restriction in your employment agreement still applies to you, even after you sign the new separation/ severance offer. Be aware.
8. Review non-disparagement provisions and ask that they likewise protect you.
Many separation/ severance offers contain non-disparagement clauses, which will say something along the lines of “employee agrees not to make any statements which disparage the company or are in any way harmful to the reputation of the company.” These provisions are very broad and much more broad than the legal definitions of defamation or slander. A single angry comment on Facebook, for example, could be a violation of this provision. If you sign an agreement that contains this, be aware that you should avoid any negative commentary about your former employer, including online.
Likewise, you can ask for the same protection for yourself – that the employer commits not to make any disparaging, damaging, or negative statements about you in the future. Again, don’t be afraid to negotiate.
9. Control your future reference.
Similar to non-disparagement, you also have the option to ask for language which will control what your now former employer can say about you when you need future potential employers to call them for a reference. The exact language is up to you, but we often request a provision that will only allow the employer to confirm your dates of employment, and position or title held. You can agree or not agree to allow the former employer to give out your salary information.
10. Arbitration clauses.
Many separation/severance offers include a clause which states that any dispute under the agreement must be brought in arbitration. Like the rest of the provisions, it is ultimately up to you what you are willing to sign, but we typically encourage clients to fight against these provisions. It can be counter-intuitive, but if a dispute arises, our experience has demonstrated that employees can often have much more leverage without arbitration restrictions.
For more information about this article, please contact our employment attorneys at Carey & Associates, P.C. at email@example.com or call 203-255-4150.
A record 22 million people were laid off in one month since the coronavirus pandemic shut down large portions of the U.S. economy as of the week ending April 16, according to the Wall Street Journal. The estimated current employment rate is 13.5%. But were all those layoffs really due to the corona virus or did employers use the pandemic as cover to get rid of employees for other reasons, maybe unlawful reasons. This is the big question many unemployed Americans are now asking. Please review the following frequently asked questions and see which applies to you.
FAQ: Were you recently furloughed, laid off, demoted or terminated due to COVID, but your co-workers remain employed?
FAQ: Is your Employer still operating and profitable, yet you were laid off or had your compensation reduced due to a business decision to reduce costs or eliminate your job position?
FAQ: Were other younger employees retained, while you were furloughed, laid off, demoted or terminated?
FAQ: Were you laid off or terminated and not offered any severance or insufficient severance?
FAQ: Were your unemployment benefits interfered with?
FAQ: If you were unable to continue to work because you were sick, because a family member was sick or because you have young children at home, were you permitted to take FMLA leave or were you instantly laid off or terminated?
FAQ: Were you the only one furloughed, laid off, demoted or terminated or due to COVID, even though your Employer is calling it a “reduction in force”?
FAQ: Do you think your Employer was looking for an excuse to get rid of you?
If you answered yes to any of the above, your seemingly straightforward COVID-based termination may be unlawful. Unfortunately, the majority of Employees in the U.S. are “at-will”. This means that employees are at the absolute and arbitrary whim of their employers and they may be demoted, terminated or otherwise treated adversely for any reason or no reason at all. The exception to the anything goes rule of an at-will employment arrangement is that employees may NOT be treated unlawfully.
If you have recently suffered an adverse change in the terms and conditions of your employment amidst the COVID-19 crisis, you may still have viable claims against your employer for unlawful or wrongful treatment. COVID-19 is not and should not be a catch-all excuse or defense for employers’ bad behavior and even a crisis of this magnitude does not relieve employers of their obligation to treat employees lawfully at all times. If something does not feel right to you about the circumstances of your change in employment, it is prudent to speak to an employment attorney and review the fact pattern surrounding your work situation. It is in your best interest to discern whether your employer may be using COVID-19 as a sham or cover for otherwise unlawful behavior.
Unlawful or wrongful acts that may entitle an employee to monetary damages for claims against their employer will usually fit in one of three scenarios. Employers actions can be shown to be unlawful if they:
1) violate or fail to comply with any legislative mandate, act or
2) breach a valid contract or agreement; or
3) discriminate, harass or retaliate based on a protected class trait.
COVID-19 does not give employers a green light to violate laws, ignore contracts or discriminate against employees, and a termination under any one of those scenarios might be a wrongful one.
Scenario 1 – Statutory Violations:
Employers must abide by all existing laws and statutes, especially as they apply to the COVID-19 pandemic. It is the employers’ obligation to stay abreast of and comply with all new mandates imposed and legislation enacted in response to COVID-19, including, but not limited to enhanced FMLA, the CARES Act and the expansion to the Unemployment Compensation Act. This is in addition the existing laws that have long protected employees from discrimination and retaliation such as Pregnancy, Sex Harassment, Sexual Stereotype, Disability, Age, Whistle Blowing and Family Medical Leave, to name just a few. Thus, any analysis of whether your termination was lawful and proper should begin with a review of the facts relative to the controlling law and any revisions and updates to those laws. If you identify any facts in the events leading up to your termination that just do not seem right, you may have uncovered the hidden basis for your termination. For example, you got a good review last fall and received a bonus in January, but in March you were terminated without explanation. The small window between the January bonus and March termination should be closely examined for any facts supporting bogus performance issues, favorable treatment given to other employees and not you and replacement by coworker who is substantially younger and lesser qualified. The examples are endless, but you get the gist. See further discussion below.
Scenario 2 – Breach of Contract:
Even an at-will employment arrangement must be considered in light of any existing employment contracts or agreements between the employer and employee. In addition to or in the absence of a formal written employment contract, Courts may look to such documents as offer letters, on-boarding communications, employee handbooks, published severance plans and emails in order to demonstrate the existence of any enforceable covenants between the parties that may speak to such topics as causes for termination, compensation, bonus, healthcare, long term incentive compensation and severance. Thus, where a valid contract can be established as to any of your employment terms, your employer is bound by those terms and any deviation may be an unlawful breach for which you might be able to seek and recover damages. So, if you have been terminated or otherwise caused to separate from your employer, even if you are at-will and even amidst the COVID-19 crisis, it is imperative that you review all of your documents in order to discern that you are being treated lawfully according to the terms that were agreed upon and promised to you.
Scenario 3 (THIS IS THE BIGGIE) – Discrimination Claims:
Even if you are an at-will employee who was let go as a result of COVID-19, you may still have a claim for wrongful termination against your employer if their decision to let you go was at all based on discriminatory motives. Discrimination is unlawful and where an adverse act is taken against you because of such protected traits as your age, gender, pregnancy, race or national origin, disability, perceived disability, associational disability or sexual orientation, you may have legal claims against your Employer.
In the absence of direct evidence of discrimination or the smoking gun as we call it, discrimination can be shown if you are a member of the protected class and you were treated adversely (demoted, furloughed, laid off or terminated) under circumstances which give rise to an inference of discrimination, i.e. circumstances that show discrimination was the substantial motivating reason for the adverse act taken against you. The way an employer can defend itself against such a claim and rebut that inference is to show that there was a “legitimate” lawful reason for the termination, such as performance issues and other cause such as a business decision or reduction in force.
Certainly, you can all see where this is heading. COVID-19 and the related financial fallout provides your employer with the legitimate business reason it needs to “lawfully” terminate you. However, this cannot be accepted at face value. In fact, if you are able to show that the supposed legitimate reason relied on by employer was a sham or cover for discriminatory motives, you may prevail on your claims against them in a severance negotiation. There are surely many situations where an employer, especially during these challenging economic times, needs to make a tough business decision to lay off employees or institute a reduction of force, and where their decision to do so is legitimate and truthful.
Employer May Have Used Covid-19 As An Excuse to Fire You
However, there are also many instances where certain employees are selected within the context of a business decisions, based on discriminatory motives. For example, the company makes the “business decision” to lay off only the older employees, or only the female employees or only the pregnant employees. In addition, there might not even be any explicit or formal business decision to reduce costs or a effectuate a reduction in force, but your employer may still feel safe engaging in discriminatory behavior knowing or hoping that any terminations taking place now will be viewed as a necessary and legitimate, due to the Covid-19 business climate. Again, we cannot allow employers to use this catch-all defense to what maybe culpable and unacceptable discriminatory behavior. If you see something, say something to an employment attorney.
There is no doubt that both employers and employees are presently finding themselves in the most difficult and tenuous circumstances. However, employers, in response to COVID-19, seemingly have absolute power and new founded legitimacy to make discriminatorily targeted employment decisions against their at-will employees, under the guise of a business decision. And this is very concerning and unlawful. If you are in a protected class because you are over the age of 40 or fall into any of the other class of protected traits discussed herein, and have seen a change to your employment that you do not believe was made as the result of a good faith business decision, cost reduction, reduction in force in response to COVID-19, or other legitimate basis, we encourage you to speak to an employment attorney immediately. You may be entitled to reinstatement, severance or increased severance or settlement dollars relative to your discrimination claims for wrongful termination or other possible improper acts by your employer.
Carey & Associates, P.C. is currently providing complimentary consultations for potential new clients who are experiencing any employment related issues or believe they might have possible employment claims, as a result of the COVID -19 pandemic. Feel free to contact our office if you need help with that or any of your employment matters.
By Mark Carey
What do you mean I can be fired for any reason or no reason at all? Who made up this rule? Why do I have to follow the employment at-will doctrine? Well, you don’t and there are several reasons companies and employees should shift to a modified approach that satisfies the expectations of both the employer and the employee.
I can honestly say that over the past twenty-three years handling employment law cases for both executives and employees, my clients are really confused and bewildered by the employment at-will rule and the significant financial impact it creates when employers decide to let them go. Many clients always state they understand the basic rule that they can be fired at any time and they can leave at any time. But beyond that they know absolutely nothing about why the rule came into being or more importantly how they can negotiate around it. When a termination occurs the adverse impact is clear, the uncertainty of the break in career trajectory and financial resources.
At the executive level, I routinely negotiate employment contracts that provide for termination “for cause” and “termination for good reason” by the executive. This is standard in the industry at the executive level. However, I do confront the hybrid cases, where the employer “shoves” in the provision identified as “termination for any reason”. Well, that sounds like the employment at-will rule doesn’t it, because it is. Enter the LeBron James Rule. (I made up this rule). When negotiating employment contracts, employees needs to identify their leverage factor; it is what makes the employer throw money or equity in order to induce the hire. LeBron James can write his own ticket to work wherever he finds the highest bidder, and he can demand the termination for cause and good reason provision with a severance payout. Find your leverage and do not be shy about asserting it.
Well you might say not everyone is as fortunate as LeBron. I disagree and this is what has bugged me for many years. We all too often knee jerk react and accept this stupid and ill-conceived rule that your employment is as good as the last minute or hour you just worked. Some say, just be grateful you have your job etc. Give me a break! There is a new way to handle this.
I propose getting rid of the employment at-will rule and replacing it with the modified form we see in executive employment contracts. Specifically, employees can be fired for cause or terminated by the employee for good reason. If the good reason event occurs, then the employer pays a severance amount to take care of some of the financial issues related to your transition to new employment. If you land a job, your severance stops, as this is fair in an economic theory way of thinking. “Termination for cause” means you violated the law and company policies. “Termination for good reason” means the employer materially changed your title, salary, reporting structure, location of your office etc.
Now here are several positive effects of eliminating the employment at-will rule based on my research into this issue.
- Management vs. Everybody: Eliminating the employment at-will rule will get rid of the large divide between management and employees. Literally, this is the trust divide. If you scare employees into believing they can be fired any time, management is not creating a loyal and trusting environment that spurs innovation and creativity which will push the company forward in profound economic ways. Employers want employees to be focused on their work, but this rule is utterly distracting and frankly non-motivating. The rule erodes any semblance of entrepreneurial creativity among the team. Employers need to seriously rethink this one.
- HR vs. Everybody: Honestly, did you really believe the Human Resources Department was there to help you. I make it my mission to point this out to every client I have. They (HR) have a duty of loyalty to the employer and have absolutely no interest in doing what’s right for you. By eliminating the employment at-will rule, employees will closer align themselves with HR and HR will do a better job of “caring” for the very employees that make up the company; without employees you have no company. Where did all those employers go astray?
- Eliminating Fiefdoms: Does your boss have their favorites? Do they hire from the last place of employment? Are there any “brown-nosers” in the team who believe the only way to the top is to “work it” what ever that means to you. It’s childish and it’s irritating to say the least. You know what I am referring to. Why do other employees do this and why do supervisors encourage it? Eliminating the employment at-will rule will breed meritocracy, but not the type Bridgewater Associates thinks they are creating. Employees will begin to feel compassion for their coworkers and work more closely as a team or family, instead of putting a knife in their back at work. Employees will work with management for the company common good; all will prosper together not just the few.
- Reducing Discrimination: If you create trust, honesty, transparency and vulnerability, then you create lasting relationships where employees want to stay and work. Employment discrimination bias arises from many reasons, but my theory is that if you get rid of the employment at-will rule you will gut the walls that employees build in their work environments with the sole goal of getting ahead. Think about it. If you say something or do something negative about another person to make yourself look better in the eyes of your employer, you will do it to get ahead. That negative comment or idea could be motivated based on gender, age, race, religion or manipulation like seeking sexual favors in exchange for career advancement. We need a sea change to course correct our current direction. The status quo just doesn’t work anymore; although it may work for employment attorneys like myself as we are very busy policing this garbage. If you see something, say something. Have the courage to speak out, you will be protected.
Finally, here is my shout out to older employees. If you are an older employee “we honor your wisdom and experience, you are worth every penny we pay you”. Employees who are in their fifties and even sixties are well paid because they have many years of experience to offer, more than someone twenty years their younger. I say we should keep them on board and ignore the bottom-line cost issues and focus on their economic impact these older wiser employees can create for the company. Management must stop terminating the baby boomers because the economic argument that fosters this decision making is not financially sound and never was to begin with. It’s like a bad drug addiction. Remember, wisdom still is a virtue for a reason.
When will this change occur? When management realizes they can make greater revenue multiples by providing better job security. They will have to stop listening to management side defense employment counsel who banter incessantly to maintain the employment at-will rule for every client. The world isn’t flat, or at least until someone very smart said it wasn’t. Same goes here, management should adopt this new rule and maybe just maybe they will convince themselves that #employees matter.
If you want more information about employment law issues, please feel free to contact Mark Carey, Carey & Associates, P.C., at firstname.lastname@example.org or call the office at 203-984-5536.
We all have made decisions we regret later on at some point in our lives, especially related to our work. Here are three very good reasons why accepting a severance pay may not be in your best interest.
Reason 1: Confidentiality Clauses and Clawbacks
You were just presented with a severance package but you hold the brass ring of all time employment war stories there is. You plan on exposing your employer and you are extremely agitated. Without a doubt, you think you have the greatest case in the world. Then you discover the severance agreement contains an iron-clad confidentiality clause that will prohibit you, your wife, your children and your parents, from ever telling your big story about a colossal corporate wrongdoing. If you accept the confidentiality clause and later breach the provision through disclosure, you risk the company taking back all of the severance pay and getting sued by the company. At this point, the severance pay must outweigh the potential monetary value of public exposure and your credibility as a new whistleblower. But your career may take a dive. This is the classic catch-22 I see all too often. You may not want to accept the severance agreement if the future monetary reward is great.
Reason 2: Non-competition and Non-solicitation Clauses
Remember that document you signed when you were on-boarded and were not really sure why you were checking the electronic box? Yes, that one. The non-competition and non-solicitation agreement you never intended to enter into. Now, upon separation, your employer hands you the severance agreement and you see an acknowledgment provision relating to the old non-competition and non-solicitation agreement. In the alternative, the non-competition and non-solicitation agreement is presented in the severance agreement and you never had one while working for the company. It gets worse, you were just offered a higher paying position with a competitive company which also does business with the employer (yes this does happen) or the new employer is both the competitor and the former customer/vendor). In either example, you want to accept the severance pay because it is modestly reasonable, let’s say $75,000-$100,000. But your new offer pays a salary of three times the severance amount and several years of employment. Obviously, you may want to decline the severance if this the first time you have been presented with a non-compete and non-solicitation provision, as the future salary far outweighs the severance being offered. You may want to ask the new employer to offer a sign-on bonus in exchange for the leave behind pay (severance and bonus). But what do you do if the non-competition and non-solicitation agreement was signed back on your first day of work? In this case, signing a severance agreement acknowledging the original non-compete only makes matters worse. You are stuck with the restrictive covenants. You may need to challenge the enforceability of the original agreement by declaring it void for lack of consideration (you did not intend to enter into it). We do this all the time but there are risks associated with moving forward with employer number two, mainly having an injunction filed against you. Again, the future salary will dictate your choice here and hopefully, your new employer will financially support your choice to compete.
Reason 3: Severance Amount Is Too Low
Let’s assume you have worked for the employer for ten years before being offered a severance package. When you open the agreement, the severance amount is small. You discover the confidentiality clause and the restrictive covenant provisions mentioned above. You conclude the severance is just too small in comparison to the loss of future economic value of not working in your industry. You can decline the severance and sleep well at night knowing you can remain in your chosen field of work. In the alternative, you can hire an employment attorney to scope out any and all possible legal claims to leverage on your employer to get a higher severance amount. This is what we do every day. If you’ve been terminated by your employer and offered a severance agreement, let the employment lawyers at Carey & Associates, P.C. help you evaluate the pros and cons of signing the agreement.
You have been terminated from your employment and have been fortunate enough to be offered the opportunity to separate from your employer by way of a severance agreement. A severance pay out can certainly be the silver lining in the otherwise unfortunate scenario of losing your job. In fact, it might even seem too good to be true – receiving compensation from your employer without having to work anymore and sometimes in addition to earnings from a new position. But as they say, if something seems too good to be true, it probably is. In fact, severance paid to a soon-to-be-former employer does not come FREE and there are usually substantial conditions that come along with this payment, or what the law refers to as “consideration.” As the employee, it is crucial that you are fully apprised of what you are giving or giving up in return for this payment. Knowing this at the outset means that the agreement under which the severance is offered needs to be meticulously reviewed, understood and negotiated, before you sign.
It is important to begin any conversation of severance agreement with the understanding that a severance agreement is a contract and as such, once executed, the terms and conditions are binding for both parties. While severance agreements can take many forms and vary substantially, these agreements are almost always generated by the employer and provided by the employer to the employee. As such, there are certain provisions that typically find their way into these agreements that can work to the detriment of the employee and to the benefit of the employer.
Here are examples of such severance contract items that need to be carefully considered – before you take the money and run.
Release of Claims/General Release
Almost every severance or settlement agreement will have a release clause. In fact, these agreements are actually sometimes titled, “Severance and Release” or “Settlement and Release.” It is important to fully read and understand the particular release language in your agreement. In essence, a release means that in return for the settlement pay out, the employee agrees to release the employer from any and all claims the employee might have. It is important to note that often these releases are retroactive and proactive, thereby prohibiting the employee from making a claim against the employer for something that occurred prior to the signing of the agreement as well as for any claims that might arise or which might become known to the employee AFTER the signing of the agreement. These release provisions can be extremely broad and restrictive and so it is imperative to fully understand what you are giving up in this regard. You are essentially agreeing not to bring any form of claim at any time past, present or future against your former employer.
Amount of Severance
The amount of severance provided can vary greatly depending on such factors as the situation under which you were terminated, the length of your employment and the position you held. But this amount can also be wholly arbitrary and not surprisingly, the employer will try to get away with paying as little as possible. It is advisable to look back to your initial employment agreement (if you have one), as it might set forth the specific terms of severance to which you are entitled. In addition, your employer might have a company-wide severance policy. It is also important to make sure any accrued or unused vacation days are added to your severance in the form of additional pay out. In many instances, the amount of severance can be negotiated and we strive to get our clients the maximum severance pay out under the circumstances.
This is one of the most important clauses to understand in your severance agreement. Most agreements will have some sort of a non-compete which essentially means you cannot go and work for or with the “competition” after leaving your current employer. Depending on the specific language of the non-compete, these covenants are typically highly restrictive and might actually prevent you from earning a living in the field in which you are qualified. They often significantly limit the period of time and geographic area in which you can seek re-employment and go back to work. It is ideal to have these non-competes stricken from the agreement. In the alternative, the next best course of action is to modify this clause to make it less prohibitive so that you are not denied the right to earn a living.
Severance agreements often have an expiration date masked in the form of a “review period.” Many times this is overlooked by the employee as it is not set forth as an outright expiration date of the severance offer, but rather as a period of time within which the employee has to review and sign the agreement. While the amount of time can vary, a typical review period is 21 days. It is important to be mindful of this deadline as the severance offer can be rescinded if you do not sign within the time frame set forth in the agreement. If you feel that you will need more time to fully understand and be counseled on this agreement, it is advisable to seek an extension of the review period at the outset so that you have adequate time to retain counsel, address and negotiate any issues, and not feel pressured or rushed into signing.
Disparagement and Confidentiality
Many severance agreements will have a disparagement and confidentiality clause. What this basically means is that the employee is prohibited from disparaging the company in any way and that the employee is agreeing to keep the terms of their separation from the company and the resulting severance agreement confidential. We advise our clients to modify this clause so that the disparagement and confidentiality restrictions are MUTUAL. In other words, why should this be one sided? It is preferred that both the employer and employee be prohibited from disparaging each other in the future, and that both parties be bound to keep the specific terms of the termination and severance confidential.
Bridging Pay or Set-off
Many severance agreements include language that reference severance pay out as money intended to “bridge” the time between when you are terminated from your current employer and when you seek re-employment and regain earning a living. In essence, what this seeks to accomplish is that once you gain new employment, you are obligated to inform your former employer of this and that your severance will stop on the first day of your new employment. Severance is often paid out over the span of the severance period, in conjunction the company’s usual pay roll schedule. However, we believe severance is intended to and needs to be treated as a lump sum settlement amount to which you are fully entitled, regardless of if and when you begin a new job. Even though it might technically be paid out over the course of the bridging period, at no time, even in the event of re-employment, should you be deprived of the full amount of this settlement. We will always seek to have this set-off clause removed from the agreement.
While every severance situation is unique, generally speaking these are just some of the types of matters that we counsel our clients on when they come to us after having been terminated and presented with a severance/settlement/release agreement. Our goal is to educate and counsel the client on what they are signing and specifically what they are giving up in return for the severance payout. We will then discuss what needs to be negotiated and work with the employer and opposing counsel in getting an optimal, more balanced and legally sound agreement presented to our client.
If you’ve been terminated by your employer and offered a severance agreement, let the employment lawyers at Carey & Associates, P.C. help you feel confident before signing on the dotted line.
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If you work in Connecticut, there are facts you need to know about when it comes to your employment rights. In this post we’ll cover the top 10 things you need to know as an employee in CT.
1. Employers Can Give Bad References, Just Not False Ones
Employers no longer give references for former employees, so stop worrying. Employers fear being sued for defamation or claims for negligent hire. The majority if not all employers will provide prospective employers and their recruiters with your dates of employment, position, and possibly salary. The employer will not provide the reason(s) for termination. However, if you hear your former employer said they would not recommend for rehire, that is code language that you are a poor employee. The only exception I can think of is if you and your employer are FINRA registered members, i.e. brokerages and licensed employees in the financial industry. FINRA regulated employers are required to provide the reason for termination in the employee’s U-5 record.
2. Connecticut Employees Allowed 16 Weeks Unpaid FMLA Leave
Under the Connecticut Family Leave Act, employees are entitled to take up to 16 weeks of unpaid leave. Connecticut law provides for an additional 4 weeks on top of the federal FMLA (12). Employees should ask there employers if they have short term disability benefits to coincide with the 16 weeks of leave. A typical STD plan provides for six months of paid leave at 60% of the employees base pay. Nothing is guaranteed, and the employer will not volunteer the information. Employees in need of a leave of absence must self-advocate for their rights and document all their requests in writing. Remember, your job is protected during the FMLA, but if you fail to return before your leave ends, you will lose your job.
3. Connecticut Employees Have a Right to Personnel Files
Connecticut employees are entitled to a complete and accurate copy of their personnel files, including a copy of their supervisor’s version of their file. All the employee has to do is make a written request via email to the HR department and the employer must provide a copy of the file within 30 days. If the employer refuses, please contact the CT Department of Labor and register a complaint.
4. An Unfair Employment Termination is Not Necessarily Illegal
Listen, employers can be really mean and behave in very unfriendly ways. However, just because the employer is a pain in the butt and trying to make your life miserable, this does not mean the employer’s actions are illegal. Employers do not care about employees, so get over it. Your job cannot be your identity. You are an “at will” employee and you should never assume your job is secure, even if you worked for the company for 10 years. In order to determine if your employer’s action to terminate you were illegal, you would need to speak to our employment attorneys. A quick 15 minute call to our office will flesh out the legal issues and permit us to determine if you were fired unlawfully.
5. Independent Contractors Have Rights Too
You may not know it, but if you are an independent contractor you are still protected against unlawful employment actions such as discrimination. You should also investigate if your employer is correctly classifying you as an independent contractor (IRS Form 1099) or regular employee (IRS Form W-2). We see a lot of employees misclassified as independent contractors when they should be regular workers. Employees fear challenging the employer on this classification because they believe they will lose their contract. If you are in doubt, call the CT Department of Labor or call our office to speak with an employment attorney. Also search the internet in Connecticut for the “ABC Test for Independent Contractors.” You can also search the IRS.gov website for the same information.
6. The Legal Effect of Quitting Your Job
Don’t ever quit your job! You cannot collect unemployment benefits. Also, it is too difficult to prove your voluntary job termination was a “constructive discharge”. The facts must show a series of recent events that violate state and federal law and that any reasonable person would also quit. If you are in a tight bind where your employer is giving you the writing on the wall treatment to get out, speak to an employment attorney in our office first. We will deter you from quitting and will advise you to leave your job through the signing of a separation agreement which includes a severance payment for your service with the company as a result of unlawful treatment.
7. Employees with Criminal Records Are Protected
Under Connecticut law, employers cannot refuse to hire or terminate an employee because of a criminal record. Obviously, each case is different, so you will need to contact an employment attorney in our office to figure out if you are protected.
8. You May Have a Legal Right to Severance Pay
Employees employed in Connecticut may have a legal right to severance pay. If the employer maintains a severance plan governed by ERISA (federal regulation), employees working in Connecticut are considered participants and entitled to severance pay pursuant to the plan document. The one condition to receive severance pay set forth in every ERISA severance plan is that the employee must signed a general release of claims. How do you know you company has a severance plan? You can check your internal human resource portal or employee handbook. All ERISA severance plans have to be filed with the U.S. Department of Labor. Years ago I found this free website where you can research your employer. Insert the employer’s name in the site and go through the various plans listed. You are looking for a plan labeled with the word “severance” in it. The plan severance plan code is “4i”. If you find it listed, then you know a severance plan exists. Once you have identified your employer’s severance plan, make a written request to the Human Resources Department for a copy of the severance plan. The HR Department has a legal obligation to provide a copy of the severance plan within 30 days of your written request. You will find in the plan the amount of severance pay based on your years of service with the employer. Don’t leave money on the table, but chances are the employer will remind you about your benefits, as they have a fiduciary obligation to you as a plan participant. If you need a severance attorney, call our office and speak with one of our employment attorneys.
9. How to Predict When You Are Getting Fired
Hmmm, try your gut instinct. Are you getting the awful feeling that your boss and coworkers have turned on you? You may have been a satisfactory performer last year, but this year your rating sunk or needs improvement. Or, you made a complaint to your supervisor or HR about your wages or unlawful discriminatory treatment, and suddenly your once friendly work place is not so friendly. Maybe you just announced you are four months pregnant and you are getting the cold shoulder. Worse, your supervisor makes pregnancy related comments and jokes. Finally, if your coworkers and/or supervisors are openly hostile with you and use derogatory language directed at your gender, sexual orientation, race or age, then you know the crap just hit the fan and you need to speak to one of our employment attorneys.
10. Don’t Sign Anything When You Get Fired
Isn’t this obvious? You should never sign anything when you leave your job. You should also not participate in any exit interview with the HR Department. No state or federal law mandates your participation in the exit interview. What you need to do is speak with an employment attorney in our office who will figure out if the termination was lawful and whether the employer acted unlawfully prior to the termination date, i.e. demotions, discrimination, etc.
If anything mentioned above sounds like your current situation, or if you find yourself there in the future, Carey & Associates, P.C. can help! Our firm specializes in employment, wrongful termination, discrimination, whistleblowing, and more.
If you have a non-competition agreement (also known as non-compete) with your employer, it’s important that you understand the information which can be used to legally destroy the agreement. Here are factors the courts here in Connecticut use to analyze non-compete agreements.
1. Employee Must Have an Intention to Enter into Non-compete Agreements
No one can make you sign an agreement. An employee must intentionally and voluntarily consent to entering into a non-competition agreement. But why would any employee ever want to do that. These agreements are one sided and only protect the employer. If your employer forces you to sign an agreement under threat of termination, you do have rights. Once you leave and work for a competitor, your old employer may come after you. You can successfully argue that the non-competition agreement was a sham or a take it or leave it agreement. Again, why would you ever want to enter this type of agreement? Courts routinely relieve employees from non-competition agreements here in Connecticut based on this argument.
2. The Non-compete Agreement Must Be Reasonable in Duration
Every non-competition agreement must be reasonable in duration of time. We have seen compete periods of up to five years. Courts in Connecticut have held that one and two year limitations are reasonable. However, this is only one factor in the court’s analysis and it is not dispositive.
3. The Non-compete Agreement Must Be Reasonable in Geographic Area
Every non-competition agreement must be reasonable in geographic scope. Larger employers set the geographic scope to be worldwide and nationwide. Smaller employers use more localized areas such as 15 miles from each office, an example would be a real estate office. The Courts here in Connecticut will analyze this as one factor, but it is not the controlling factor. Courts will not enforce a non-compete if the company has several offices in Connecticut and restricts employees to 15 miles from any office in Connecticut; effectively barring employment in Connecticut. William Raveis Real Estate is a company that uses this type of non-compete geographic scope. Recently, the Court informed Raveis that this form of agreement is unenforceable.
4. The Non-compete Agreement Must Not Limit the Employee’s Ability to Work
The biggest factor in whether a non-compete would be enforceable is whether the agreement limits the reasonable ability of the employee to obtain work in his or her chosen profession. If the agreement is too lopsided in favor of the employer, Courts here in Connecticut will void the agreement. Courts typically review the protections afforded the employer to protect against competitive behavior versus the employee’s right to work and make a living. Each case is fact and context specific. The next item on the list provides the solution regarding the balancing of interests between the parties.
5. Strategy to Escape Non-compete Agreements
If the employer has a non-compete, we always look to determine if the employer enforces these agreements consistently. The employer’s burden is to show it consistently applies the agreement to everyone. But if some employees leave with non-compete agreements and start a competitive hedge fund in competition with their former employer, like Bridgewater Associates, Courts will deny protection to the employer. Go to the Connecticut Superior Court website and look up the employers actions to sue employees. Also ask around and see if other employees who have departed received nasty cease and desist letters when they went to work for a competitor. If they did not receive a cease and desist or were not sued in Court, this information becomes your leverage to argue your non-compete agreement is not legally enforceable.
The main argument we always use is that the employee never intended to enter the agreement, thus there was no legal consideration or glue to bind you to the agreement. This is a basic contract issue. You will need to draft a sworn affidavit that explains when you received the agreement, had little if any time to review it, did not consult an attorney, you could not negotiate the agreement and the employer conditioned your job unless you signed the agreement. We routinely send the signed affidavit to the employer along with a very detailed legal argument. Employers either forget the matter or try to push back with a cease and desist letter, assuming you went to work for a competitive employer. We will also file suit here in Connecticut against the employer to get the noncompetition agreement to be declared illegal and unenforceable.
Are you currently looking for help with a non-competition agreement or have other employment law questions? At Mark P. Carey P.C., our employment attorneys are here to provide information and help to all Connecticut employees.
Parting ways with an employer isn’t always a cut and dry process. Especially if you’ve invested years of your time and ideas to move the company forward. If you’ve recently been let go by your employer and are unsure how to proceed with the severance package you’re being offered, here are the top 5 things you should know about severance agreements and your options.
1. Have an Employment Attorney Review the Severance Agreement
If you had a medical condition, you would seek the advice of a physician. The same logic should apply when you have a legal situation such as an impromptu termination where the employer provides a severance package. There is a direct correlation between retaining an employment attorney to negotiate your severance package and the amount of the increase in severance pay. I have seen many people over the last twenty years attempt to negotiate their severance agreements by themselves with little success in the way of increased severance. Employers simply say, “This agreement is a take or leave it deal,” when employees attempt to negotiate the agreement on their own. An employment attorney can dramatically modify an existing severance agreement to make the deal fair and balanced, including the removal of one-sided non-competition agreements. The employment lawyer can also increase severance pay by developing legal claims you did not know existed.
2. If You Want More Money, You Need a Legal Claim
Face it, if you want more money in severance pay from your employer, you need to hire an employment lawyer. An employment attorney will review your detailed factual narrative and ask very pointed questions to develop legal claims that can be used to increase the amount of severance pay you will eventually receive. The employment lawyer can also diagnose the illegal activity committed by the employer and confront the employer with a sworn affidavit supporting a comprehensive notice of legal claims. When the employee substantiates his/her case in this manner, the employer often times increases the amount of severance pay the employee will receive under the severance agreement.
3. You Can Extend COBRA Coverage
An employment attorney will often time the length of the severance pay with the length of the COBRA period. This is a routine provision that most employees do not know they can increase. In fact, you can obtain COBRA coverage for up to 18 months.
4. Confidentiality is Key with Severanc Agreements
When you receive severance compensation you provide a full release of claims against the employer that is completely confidential. Employers shield themselves against potential liability and publicity by using broad confidentiality provisions that cover you, your attorney, your financial advisor and your family. An employment attorney can narrow the confidentiality so that it is only applicable to you, relieving the unnecessary burden on your accountant, attorney and your family.
5. Legal Fees Paid By the Employer
The employer gave you the severance agreement to review with an attorney. Most employers include a provision that you acknowledge you have been given the opportunity to review the agreement with an attorney. Then, the employer must pay your legal fees to review their one-sided severance agreement. The agreement should be modified to include coverage for your legal fees.
If you’re looking to get the most out of your severance agreement and don’t know where to start, contact Carey & Associates, P.C., we concentrate in employment, wrongful termination, discrimination, whistleblowing, and more. Get the severance you deserve. Contact us now!
[Picture Attributed to the NYTimes]
On Sunday, September 10, 2017, the New York Times published an article captioned as “Bridgewater’s Ray Dalio Spreads His Gospel of ‘Radical Transparency'”. The article purports to be a fuller examination of Dalio’s social experiment at Bridgewater Associates in comparison to similar articles by the New York Times. The above article appears on the eve of his September 19, 2017 publication of Principles: Life & Work. In the article, I was quoted as stating, “[t]his whole transparency and truth-seeking thing is juxtaposed with the fact that they intentionally secretize all interactions with employees from public view.”
I enjoy taking issue with Dalio’s principles and the adverse personal impact they have had on employees at Bridgewater Associates. From my vantage point, I can see exactly what takes place inside the organization, including the fallout from poor, arbitrary, discriminatory and self-minded management decisions. Yes, Bridgewater is transparent to …an employment attorney like myself.
Can’t Get In Synch- Your Fired!
Frankly, I cannot take Principles seriously given the ample contradictory evidence I have seen. For example, Principle 20 is titled “Constantly Get In Synch”. I have repeatedly read accounts that this principle is used to throw other employees under the bus. Employees are too quick to hear the other side and grade others as “not getting in synch”, resulting in a negative score in their personnel file. Under the same umbrella, Principle 26 states “recognize that conflicts are essential for great relationships because they are the means by which people determine whether their principles are aligned and resolve their differences.” I have seen cases where Bridgewater has used this principle to deter employees from making legitimate discriminatory complaints regarding their own employment, only to be terminated shortly thereafter. I have seen legitimate discrimination cases where Bridgewater took no action to resolve them internally before the conflict erupted into a legal dispute, or maybe that was the intended result. This result conflicts with Principle 25 which states “Recognize that getting in synch is a two-way responsibility”. I have only seen employees who have felt the brunt of the one-way communication policy that exists at Bridgewater, which becomes even narrower when employees escalate to management when they “can’t get in synch”. Principle 36 states “If you can’t understand or reconcile points of view with someone else, agree on a third party to provide guidance. This person could be your manager or another agreed-upon, believable person or group who can resolve the conflict objectively, fairly, and sensibly. This mechanism is a key element of our culture and crucial for maintaining a meritocracy of ideas.” Honestly, the only objective and believable person in the conflicts brought to my attention was ….well me! If your manager is discriminating against you, please don’t believe that management at Bridgewater will take your side. You will be tossed to the curb without notice under the accusation that your refused to “cross-over” to the other side or you weren’t a “believable” person.
Trust in Truth is Misinformation
“Trust in Truth” is the number one principle at Bridgewater, but nothing could be further from the truth. Dalio states “being truthful, and letting others be truthful with you, allows you to explore your own thoughts and exposes you to the feedback that is essential for your learning” (Principle 2) and “openness leads to truth and trust.” (Principle 4). If these three laudable values are uniformly and consistently followed by the company, then the following practices violate all of them. Bridgewater uses confidentiality and arbitration agreements to quell anyone from expressing the truth about what internally occurs at this company. Any employee leaving the company for any reason is forced to sign a one-sided settlement agreement that contains a confidentiality provision. The company demands such confidentiality in exchange for severance pay, settlement money, releases from noncompetition agreements or to receive profit sharing payments, no different than any other company. Dalio and the company should be openly transparent with the public about internal employee complaints, not shield them forever in confidential settlement agreements and in private arbitration filings. This is especially true when Bridgewater is the fiduciary of public funds. How can “we” the public trust in Dalio’s truth when “we” are not being given the full weight of the evidence to decide for ourselves; we can’t and we are not in synch! More important, how can “we” confirm that employee feedback was taken seriously and the company learned from its own mistakes? As long as there is no openness, there is no trust among “we the people”.
If you believe in the natural order of things in the environment, nature will take care of itself all on its own. When mankind introduces unnatural externalities into the orderly flow of evolution, fundamental changes develop that alter the natural order in nature. Take honey bees and Bridgewater Associates for example, each have been infected with a chemical or unnatural pathogen that is slowing destroying them; don’t mess with Mother Nature.
Honey Bees and Neonicotinoids
I raise honey bees at my home, caring for about 10 hives each year. Bees are a bewildering microcosm of chaos but in reality they are a highly efficient hierarchical system of organized labor supporting their beloved queen bee. Honey bees function just fine left alone. They will raise their brood into worker and drone bees. In this culture the females run the show and everything turns out sweet as honey. By the way Drone (male) bees serve only one limited purpose, to help the queen produce more bees. There is no talking, complaining or rating systems among the employees, just a system of chemical pheromones and directional dances that make the hive hum and maintain an adequate balance sheet of honey food stores which my neighbors and I enjoy. Honey bees are born with a coded instinct to get along, just like employees (i.e. the golden rule). Then enters MAN, who seeks to disrupt the natural order of bees with a new language and culture. To yield more crop production and make lawns green as the emerald isle of Ireland, man introduces chemicals that interfere with the language, culture and natural order of bees. Please stop using pesticides on your lawn. Not only are pesticides slowing killing you, they are deadly to honey bees and other pollinators. No bees, no food, no you! Learn a new vocabulary word- Neonicotinoids. Connecticut and the European Union is moving to completely ban this epidemic use of the chemical, which has been proven to cause colony collapse in bees. I can personally attest that Neonicotinoids kill bees, I lost 20-30 hives in the past three years because my fellow citizens treat their lawns with this chemical. I hope for a better future and continue to raise bees.
“Principles” Are Not Working at Bridgewater Associates
Then there is Bridgewater Associates, located less than three miles from my office. I am not saying the company ever used pesticides on employees, but maybe they used a psychosocial pathogen to infect their culture, aka “The Principles”. The company and its founder have introduced an unnatural externality into the work place previously never seen in the working world. With the introduction of a new language and culture, which I comically refer to as “Newspeak”*, the company’s founder Ray seeks to re-order the natural order of human interaction at work- impacting 1500 employees at its’ two campuses in Westport, Connecticut. The company’s Newspeak presumes we are weak and dysfunctional and we need to be fixed. Bridgewater Associate employees must reconcile themselves with the founder and leader “Ray”, who is on a self-promotional advertising campaign these days to compel future disciples to follow him on his legacy, to buy into the Principles. When you force employees to hold ipads and rate one another during every human interaction (only the negatives and not the positives) something seems strangely unnatural. The employees must follow Ray because they have no choice. Either follow or exit the hive after two years or less with significant handcuffs related to confidentiality and noncompetition. Employees are people, not machines processing big data. They have feelings, emotions, disabilities, and sometimes it is just OK to be vulnerable and weak. Presumptively, employees seek out encouragement, optimism and uphold a personal desire to succeed in their careers. Principles or Newspeak seeks to prey upon the weak and injured and suck dry any semblance of empathy and “Compassion”, a Buddhist concept (Bodhicitta or “enlightened mind”). Yet Ray wants to sell his brand of Principles to every corporation and we should all be concerned.
(*“Newspeak” was a phrase used repeatedly in George Orwell’s infamous novel 1984 and fully described in the Appendix to the novel. “Newspeak was the official language of Oceania and had been devised to meet the ideological needs of Ingsoc or English Socialism…The purpose of Newspeak was not only to provide a medium of expression for the world-view and mental habits proper to the devotees of Ingsoc, but to make all other modes of thought impossible. It was intended that when Newspeak had been adopted once and for all and Oldspeak forgotten, a heretical thought—that is, a thought diverging from the principles of Ingsoc—should be literally unthinkable, at least so far as thought is dependent on words…For the purposes of everyday life it was no doubt necessary, or sometimes necessary, to reflect before speaking, but a Party member called upon to make a political or ethical judgment should be able to spray forth the correct opinions as automatically as a machine gun spraying forth bullets. His training fitted him to do this, the language gave him an almost foolproof instrument, and the texture of the words, with their harsh sound and a certain willful ugliness which was in accord with the spirit of Ingsoc, assisted the process still further.” Id.)
Contact Mark Carey at email@example.com.