Severance is generally a voluntary process. Unless you have a contract or some other contractual guarantee of a severance, your former employer is not required to offer you anything. Similarly, you are not required to accept what the employer is offering. The main thing to ask yourself when you are presented with a severance package is: What am I giving up, what obligations am I being asked to take on, what am I getting in exchange, and is this a good deal for me?
While the terms of any severance agreement are going to be different, there are always three types of information in each one.
What you are giving up:
The most obvious way that you are giving up rights is that almost every severance agreement includes a release of claims. Broadly, you are giving up your right to sue the company for any employment law violations. In a very general sense, this means that you need to be willing to walk away from all claims you may have against the company. There may be other things you are giving up by the terms of the agreement too. These types of things might include getting a favorable letter of recommendation, the right to say negative things about the company and other rights that you have if you do not sign the severance.
What are you taking on:
Many severance agreements also impose affirmative obligations in the contract. Some obligations include the agreement not to compete with your former employer or solicit their clients or employees. Other common obligations include the obligation to keep the terms of the agreement confidential and to avoid saying negative things about the company in the future. These types of provisions have all sorts of positive and negative implications on former employees, and it is always worth thinking very critically about the long-term implications of these types of provisions.
What are you getting in exchange:
The most obvious answer can usually be found in Paragraph 2 – Consideration. Employers like to put the dollar amount up front and obvious in the hopes that you won’t read any further. The hope is that you will be so dazzled by the extra money that you won’t consider the implications of accepting the amount. This is a trap. Be careful. It is important that you read the rest of the agreement and think critically about what you are giving up, then think about what you are getting, and decide if it’s worth it.
You are NEVER under an obligation to accept a severance. Just as an employer usually does not have to offer you a severance, you are not bound to accept what is being offered. When you are terminated and offered a severance, there are always three options: 1. Don’t accept anything and move on with your life; 2. Take the amount offered; 3. Try to negotiate for more. If Option 3 does not work out and you cannot get the company to offer more, then the options shift to: 1. Move on; 2. Take what is offered; 3. Start the lawsuit process. Just because you don’t take the severance offered, that does not mean that you HAVE to file a lawsuit. If you do not accept the severance offered, you are not obligated to the terms presented in the agreement.
Remember everything in a severance package is negotiable. A severance is nothing more than an agreement between a former employee and their former employer for some terms. The terms under each agreement will vary dramatically. HOWEVER, because everything is negotiable, that means that nothing is required. You may want your former manager to have to stand on their head for 30 seconds every other Tuesday in remembrance of the way they mistreated you, but it is very unlikely that the former employer will agree to such a term. Just as you don’t have to accept the terms offered, the company does not have to offer terms other than those presented.
It is this push and pull that makes severance negotiation very bespoke. There is no one size fits all answer or approach. Every situation is truly unique. The answers depend on the former employer, the industry, the job duties of the former employee — whether you’re in an entry-level position or part of the executive or C-suite team — the length of service, the facts surrounding the termination, the willingness of the former employer to deviate from their “standard” agreement form, and many other details.
The best thing to do when presented with a severance package is to ask yourself if it’s worth it. If you need more money in exchange for what you are giving up and what you are taking on, ask for it. There is no requirement that you have an attorney ask on your behalf. Some former employees prefer to have an attorney negotiate for them, but remember that lawyers are just people. They are not magicians. They have no backdoor secrets that force former employers to offer more money. You can ask for yourself – you may want an attorney to do it for you, but it’s not a requirement.
You can also consider the idea of DIY-ing your severance negotiation and then having an attorney review the final result before you sign. This type of representation will be cheaper than a lawyer-led severance negotiation, and you can still have the confidence of signing the agreement after having an experienced attorney review it for you. One word of warning here: Frequently, companies will provide a 7-day revocation period during which you may change your mind after you have signed and revoke the acceptance. Do not use a threat to revoke to try to negotiate better terms. It is always better to negotiate your terms before you sign rather than try to threaten the company later after you’ve signed in an attempt to get a better deal.
Severance can be a very helpful tool when you are terminated unexpectedly due to circumstances that are beyond your control. It helps recently laid-off employees have a soft place to land and begin to prepare for the unemployment period. However, there is never an obligation to accept what is offered, and there is never an obligation by the former employer to alter the terms of any offer it may make.
If you’ve been offered a severance agreement, don’t sign before understanding your rights. Contact Workplace Law Partners for a free case review and ensure you’re getting the compensation you deserve.