At Carlin & Buchsbaum, LLP, we are frequently asked to review severance agreements. This occurs primarily in two distinct situations. First, there are occasions where there is some significant controversy related to the termination, and the employer is offering severance to buy peace of mind. For example, this may involve a termination of an employee who has recently complained about illegal workplace conduct, such as sexual harassment. In this situation, it’s important for the employee to have an experienced employment attorney evaluate the merits of the underlying case. The wrongful termination case might be much more valuable than the severance offer. Moreover, the employer might know that the wrongful termination case is dangerous, and this opens the door to negotiating a higher severance and other potential employment benefits.
The evaluation of the underlying case, however, might reveal that things would be very difficult and that the chances of success in court would be relatively low. This would dictate an effort to negotiate a higher severance through legal counsel, but with a clear goal of signing the severance agreement if that fails. The law doesn’t require severance payment, even to long-term employees, so not accepting a severance offer (even if very low) would be leaving money on the table.
The second type of severance agreement we frequently see arises in connection with layoffs. If you work for a large employer, and due to restructuring many positions are going to be eliminated, you may receive a severance agreement. The Agreement would typically pay you some number of weeks of severance in exchange for a release of all potential claims against the company. Some companies have formulas for arriving at the severance amount (i.e. 2 weeks for each year of service). In these situations, it’s very difficult to negotiate with the employer. If they make a deal with one employee, word might get out, and the company might get stuck in negotiations with many different employees over the severance amount. As a result, employers tend to be very inflexible in these situations, and your ability to negotiate increased severance benefits is diminished.
In some cases, however, a layoff might be suspect. For example, employees on pregnancy leave who are “laid off” might claim they were laid off due to their pregnancy, particularly if other less senior employees somehow managed to survive the layoff. In these cases, the employer might be more willing to negotiate because of the liability risk.
Money is not the only thing that can be negotiated in connection with a severance agreement. For example, at Carlin & Buchsbaum we frequently get concessions from employers not to challenge applications for unemployment benefits. That can be a tremendous benefit to someone who is losing his or her job, and might not have such a clear right to unemployment. We are sometimes able to get employers to continue making health insurance premium payments for an extended period of time, even when the employer is unwilling to offer any more cash to the deal. We also think it’s important to include what is called a “neutral reference provision.” This is an agreement by the employer not to give a bad reference to future employers, and to limit information provided to dates of employment, title and rate of pay.
Negotiating a severance agreement can be complicated. The employment law attorneys at Carlin & Buchsbaum can help you navigate through the process so that your interests are protected.