Negotiating and Accepting Severance Packages

A severance package is neither a gift nor a simple payout.

A severance package is a deal, and the deal is, at its core, very simple: you, as the former employee, receive compensation and your former employer receives various protections. Usually, your employers will seek a general release of claims. Sometimes your employer will seek confidentiality. Sometimes, your employer will seek an agreement that you won’t speak poorly of the company once you have been terminated.

Put plainly, you have things your employer wants to buy when you are terminated. Now, you and your employer need to negotiate what you are willing to sell and and an appropriate sale price .

Upon leaving employment at your company, you may be asked to review and sign a severance package that contains complicated, detailed legal language about future compensation and rights to take legal action against your employer.

This agreement will usually state that you have been informed that you should seek the advice of an attorney before signing the agreement.

You should seek the advice of counsel before signing a severance agreement. Our attorneys have experience reviewing, editing, and negotiating severance agreements with employers. We can provide a brief review to flag potential concerns, or a more in-depth representation in which our attorneys draft, propose, and negotiate directly with your company over terms you wish to add or terms you wish have removed Here are a few reasons why hiring an attorney before signing a severance package is a good idea:

• Employers frequently seek a “General Release,” or a release that releases the employers from all possible claims. More and more frequently, these releases are becoming absurdly broad. For example:
  • Wanda was laid off last week by Company X and offered a severance plan for one month’s pay in exchange for a General Release. This seems like a fair deal to Wanda.
  • Two months ago, Wanda was in a car accident. A van from The Caterer hit her car and sent her to the hospital for a week.
  • In the General Release, Wanda agreed to release all claims against any “employees, officers, agents, or assigns” of Company X.
  • How does this come together? Wanda did not know that the van from The Caterer was hired by another office of Company X for a lunch event when it hit her car. The van was likely acting as an “agent or assign” of Company X and Wanda may have lost her ability to pursue a claim against The Caterer by signing her severance package.
• Employers frequently want a confidentiality clause that applies to you. How will that affect your future job hunt? Do you want the confidentiality clause to apply to the employer as well?
• Employers often want a clause that guarantees that you will not speak ill of them after you leave. Is that something that you are prepared to promise? If so, what is the fair cost?

Proper Time to Negotiate

A common misconception is that severance plans need to be negotiated during a separation from employment. In reality, this is one of the worst times to negotiate them. Severance packages can be negotiated during employment, before you begin your employment, or once you know that your employment will end.

The most beneficial severance packages are negotiated when no one expects that employment will end any time soon. It is a topic that clients are frequently shy about bringing up, but early severance negotiations can reap substantial rewards.

Whether or not you are considering leaving employment, consider allowing our attorneys to help you negotiate a severance package, and remember that you should have an attorney review a severance package before you sign one upon leaving employment.