Severance What to Know Before You Take the Money and Run
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.
Severance What to Know Before You Take the Money and Run. 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 or email to firstname.lastname@example.org.
You Got Fired By an Artificially Intelligent (AI) Computer!
Ugh, you got fired by a computer! Artificial Intelligence has arrived in the workplace at breakneck speed. Decisions about your performance and termination are being made by artificially intelligent machine learning computers. I enjoy sci-fi but the news of computers making decisions about performance and terminations has serious legal implications you should be concerned about.
Artificial Intelligence in Use Today
Companies such as Google and Bridgewater Associates have built powerful computers that render decisions about performance and termination. Currently, AI computers operated by Google and Facebook have been found to discriminate based on race or gender. See NYTimes Article July 9, 2015. Companies in the recruitment field have begun using AI in recruiting. For example, the new start up company Pymetrics built an AI machine to remove bias in the recruiting process.
A Very Disturbing Future For Employees in Employment Discrimination Cases
Today, employment discrimination cases are determined by direct or circumstantial proof of intentional discrimination against a variety of protected classifications of employees, i.e. sex, age, disability, race, sexual orientation etc. Employment Attorneys, courts and juries routinely examine the human interactions underlying factual evidence to determine if an employee was terminated or adversely treated because of an unlawful bias or intent to discriminate held by a supervisor, a.k.a. a decision maker. What happens when you replace the “human” decision maker with an Artificially Intelligent computer? Answer, chaos!
I predict that employers will shift the decision making to a computer and eliminate the decision making from their managers and human resource personnel. This AI HR Bot will conduct internal investigations, interview employees and witnesses and render a decision to terminate. All these functions will comply with current state and federal laws required of all employers. Most importantly, the AI HR Bot will make the “final” decision to terminate the employee, leaving employees and their attorneys, helpless to prove some human being held a discriminatory bias against them. You could expect this future to arrive in one to three years.
What can you do to prepare for the future when computers terminate you? Computers function on data, so employees should create lots of positive favorable data inputs for the AI computer to examine. For example, you should use company email to document abuse and make complaints to your manager. You should also use emails to write rebuttals to factually baseless performance reviews that are done on-line by your manager. Save all of your supporting data on your own home computer.
Finally, you should hire an employment attorney to guide you through the process to develop a case to support your lawsuit or severance package.
If you have employment law questions or need help with specific workplace issues, contact Carey & Associates, P.C. Our employment lawyers can consult with you regarding your issue and offer guidance on the next steps.
Top Five Things to Know About Severance Agreements
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 Severance 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.
Top Five Things to Know About Severance Agreements. 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.
So, you’ve been laid off. Your soon-to-be previous employer has handed you a packet of documents outlining your severance package and you have a ton of questions. Should you sign your severance agreement now? Should you take the time to look it over? What does all of this mean? Whew! Take a breath. We know this is an extremely overwhelming time for you and your family, and we’re here to help. Here is what you need to know about your severance pay:
What is Severance Pay?
Severance is a term of your employment agreed upon by you and your employer. Your employment contract may stipulate your entitlement to severance pay, or it may be a company policy applying to all employees. Regardless, employers must establish a documented, justifiable business reason for your layoff resulting in severance compensation. You should speak with an employment attorney to understand your severance rights as an employee.
What is your severance pay based on?
Your severance pay is determined based on the number of years you have been with your company, whether you are in a management or executive position in the company and the size of the company. Your employer will also take into consideration whether severance is listed as a part of your employment contract.
How is Severance Paid Out?
Severance is not always monetary. Instead of handing you a check, some companies may extend your health benefits for a period of time or offer career coaching and outplacement consultants to help you jump into a new position. If you’re unclear about how your severance will be paid out, or do not feel it is in line with the value you brought to your company, speak with one of our severance negotiation attorneys in Connecticut today.
Speak With an Employment Attorney in Connecticut Today
Severance packages can affect your ability to claim unemployment insurance, and there may be year end tax liabilities if you receive a lump sum or continued salary payments. We want to make sure you are making the right decision for yourself and your family now and in the future. Before signing anything, sit down with one of our employment attorneys today to review your current severance package, discuss how you could receive more for your layoff, or to review your employment agreement as a whole. Let us help you start this next chapter in your career. Contact Carey & Associates, P.C. today!
Employers Pay Severance Out of Fear of Getting Sued
The real reason companies pay severance compensation is because they fear being sued by folks like myself. Employers are super paranoid over employment lawsuits, and the severance amounts I have received prove it. I have participated in hundreds of severance cases over my lengthy career and I would like to share my observation in an attempt to contribute information into the dysfunctional and incongruent playing field between employers and employees that continues to exist unimpeded.
Employers maintain a constant fear of litigation because they know they are breaking the law regarding their treatment of employees. This is the only reason why I have been so darn busy over the past two decades fighting employers. I refuse to give employers the benefit of doubt due to mistake or ineptness, as that viewpoint is foolish and naïve. Big businesses and small, save a heck of a lot of money when they unlawfully terminate employees, fail to pay wages and fail to pay employee benefits. A relative with a business degree once remarked that companies are in the business of assessing and taking risks. That is exactly the behavior I have been watching my entire career. Employers know their actions are illegal, but take the risk nonetheless. They do it because the financial motivation is enormous. They know the variables of the transaction and manipulate them to their favor. Finally, employers see employees as powerless to do anything about, which in my opinion is poor business judgment. The more often employees confront guilty employers, the less likely employers will continue to abuse employees.
My observation is simple. The more dollars employers offer during the severance negotiation, the more likely the unlawful activity occurred. On average, I have seen final severance amounts in the range of $150,000, $300,000, $550,000 and even $750,000. Of course, I cannot disclose actual case amounts to due confidentiality, but I wanted to give you a feel for the amounts employers have been paying to cover up their unlawful behavior.
The aforementioned amounts are not the result of ERISA severance plans or pre-negotiated executive severance agreements, but reflect cases where I have demonstrated employer liability across a spectrum of claims without the use of litigation. Specifically, and it is no secret, you have to have a valid legal claim(s), supported by lengthy detailed facts, in order to convince the employer of their own misdeeds and get them to pay severance. I have a rule of thumb, roughly 80% of the time the employer would rather negotiate a pre-lawsuit settlement, then risk the public disclosure and extreme litigation costs. Employers also know that once other employees learn of the disastrous liability, others will follow, so they quickly put a lid on the deal with a severance agreement containing a strict confidentiality clause. However, I routinely receive calls from multiple employees from the same company, including people previously named in prior cases. Fortunately, news does travel fast amongst employees before employers can lock down the confidentiality provision in the severance agreement.
Employees faced with a severance offer should dumpster dive into the facts and consult an employment attorney. Severance compensation could result with limited financial investment into legal fees.