The most far-reaching employee mistakes involve agreeing to severance packages without taking time to carefully review them.
Employees who are facing job termination are often asked by employers to sign severance agreements, including what is known as a general release.
I have found there are 10 employee mistakes commonly made regarding severance agreements and releases. This article explains why these are so common and what you can do to avoid them and get the severance agreement package you deserve if you are ever faced with a layoff or other separation.
Mistake #1 – “There is no law which requires severance pay, so why would my employer pay me one?”
True, but then why do almost all companies pay a severance? Because the potential alternatives may have far worse consequences! Keep reading…
Mistake #2 – “I’m an at-will employee. I can’t get severance pay.”
At-will employment only means you are employed for an unstated period of time.
This means you can leave at any time without giving notice. In that same respect, your employer can terminate your employment at any time.
It is important to remember that (1) a termination must be for legal reasons and (2) a layoff must be performed legally!
Being in an at-will employment state, or having an at-will employment contract, does not mean you cannot or will not be offered an acceptable severance package. Employees often under estimate the leverage they have to obtain a comfortable separation package, at the time they may need it the most.
Mistake #3 – “I have no leverage to get severance pay, and I don’t want to ‘burn bridges’ with the company.”
This could be the most serious of the employee mistakes I’ve observed.
If you are about to leave or lose your job, your employer has a lot to worry about. This is the case regardless of whether you were fired for poor performance, laid off, outsourced, or resigned. Employers have to consider:
- Negative publicity, particularly if there have been complaints about management behavior
- Complaints from former employees and even board members (particularly for publicly-owned companies)
- The possibility of being sued and the disruptive time and expense of litigation
Companies want you leave quietly and prevent any possible controversy. Many companies expect to negotiate severance packages in exchange for a separation and release agreement. You can leave on good terms and on your own terms!
Mistake #4 – “Although my company discriminated against me, my claim doesn’t stand a chance. I should just take the severance.”
This is the second-most worrisome among the employee mistakes I see. If you think you might have a valid discrimination claim, ask yourself these questions before you sign anything your employer offers:
- Is your claim a firm one?
- Can you prove it? Do you have documentation about illegal behavior?
- How much money have you lost as a result of the company’s conduct?
If you believe your claim is valid and worth more than the severance benefits the company is offering, get an Arizona severance attorney to assess your claim. He or she can advise if you should sign the agreement as it is, or whether you should try to negotiate a better deal. There will also be a discussion about whether your claim is strong enough to consider suing the company.
Don’t make the mistake of giving up more than you should. If you have any doubts or questions, play it safe. Talk to a knowledgeable employment lawyer.
Mistake #5 – “My severance package is NOT negotiable and must be signed right away.”
No, it is not. This is not a decision that should be made in a rush.
Human Resources and your boss will push you to take the check they’ve already cut and sign a release agreement right away. Don’t do it.
No employment situation is ‘take it or leave it.’ Tell them you need to think this situation over. They will not, and cannot, withdraw the severance offer—even if you ask for more!
By law, employers must give you time to consider a severance agreement, anywhere from three weeks to up to 60 days. The Older Workers Benefits Protection Act also requires employers to give terminated employees ages 40 or older sufficient time to review a proposed severance agreement and release.
If you are the only individual being terminated, you have 21 days to decide whether or not to sign. When there is a general reduction in force, the employer has to give employees at least 45 days to review the agreement before signing it.
Finally, you have seven days from the date you sign the agreement to change your mind. This is more than enough time to negotiate a better severance package even if you went ahead and signed on the spot, as too many employees will do.
Mistake #6 – “If I don’t sign the agreement, I won’t get any severance.”
Many employers have standard severance benefits plans. These plans are governed by the federal ERISA statute that requires employers to pay a standard severance benefits whether or not you sign a release.
In other words, if the employer is offering its standard severance package and nothing more, you don’t have to sign the release. In addition, the Older Workers Benefit Protection Act requires employers to give workers over age 40 additional payment beyond its standard package in return for signing a release.
If you do not get the extra benefits, the release will not be valid.
Mistake #7 – “I can negotiate a severance package by myself.”
People who do this always underestimate their own value, what their company is offering others, and what the company can provide in a severance package.
An attorney will look for additional payments that may be due to you and recommend important legal protections in a severance package to help you start your new job search.
Mistake #8 – “I don’t need an attorney to review this package.”
All separation and release agreements state that you should consult with an attorney to review the release of rights before signing it.
This is for your protection. Non-lawyers often miss or misunderstand hidden restrictive covenants inside a Separation/Release Agreement and within your original employment agreement.
Don’t overestimate your legal knowledge of employment law. It’s really very complex. Get an experienced Employment Attorney to review your severance agreement, non-compete, and employment contract background. Even a family or business law attorney can miss important points.
Mistake # 9 – “I can always get another job in this field.”
Many companies require their employees to sign noncompete agreements before accepting employment or afterward. These agreements often prevent them from working for a competitor for a certain period if they leave their jobs. Some agreements last as long as a year or more.
A noncompete agreement can severely affect your ability to find a new job in your field. Courts will often enforce noncompetes regardless of the reason for termination.
Keep in mind that employers often include a noncompete agreement or clause in Severance packages as well.
If you signed a non-compete agreement that limits your ability to find a new job, you need to determine if your severance benefits this into consideration and are adequate For example, what are you going to do if your severance benefits run for six months, including salary, but your noncompete agreement prevents you from working for a year?
Mistake # 10 – “My employer will give me a solid reference.”
Many severance agreements are silent about the references an employee will receive from the employer.
In effect, this means that your employer’s human resources department will give only a minimum of information about your employment at the company. This lack of information can make it harder to find a new job. You may be able to control the type of reference you will receive.
Remember, when you sign a general release, you are giving your employer something of great value. You should get something useful to you, too.
Severance agreements cover more than money and restrictions on you. Before you sign one, think about the type of reference you want and who prospective employers will contact for the reference. Once you’ve worked that out, discuss it with your employer to include it in the severance agreement.
If you are facing a request (or demand) to sign a Severance Agreement or general release, please contact our office for a consultation. Don’t give away your future.