First, what is a severance package?

Severance packages are pay and benefits an employee is offered when they leave employment with a company. A severance package may include compensation or payments based on years of service, payment for unused vacation time or sick leave, insurance benefits, bonus payments, or stock options. There also may be an offer of outplacement assistance to help you find a new job.

In exchange for receiving a severance-package, most employers will require the employee to sign a Separation and Release of Claims Agreement, which describes the severance pay, compensation and many benefits, but it will also contain several other sections. For example, most severance agreements contain a clause requiring the employee to release any claims the employee might have against the employer. The severance pay agreement might also include a clause limiting your ability to go work for a competitor. The agreement might further prohibit you from speaking out about your employer in a negative way.

Second, why do employers and companies offer severance pay?

The number one reason corporations offer severance pay is to avoid a lawsuit by the employee. The second reason employers provide severance packages is the do not want to be disparaged by former employees. As a result of these reasons, severance agreements are offered to employees. And the good news is they are truly offers, which can be NEGOTIATED! The Severance and Release of Claims Agreement is a contract, and ALL contracts are negotiable under federal and state law. Don’t let your employer fool you that severance agreements are non-negotiable! In fact, some federal laws require that the employer must state in the severance agreement that you have 21-days to review the severance package, or even up to 45-days in major layoffs, to negotiate your severance pay.

Third, are employers required to provide severance pay?

Under the Federal W.A.R.N. Act (Worker Adjustment and Training Notification), you have protection. If your organization has over 100 people and is preparing to lay off a lot of people, your employer is required by law to give you 60 days notice of a company closing or a large departmental closing. If your employer fails to give you the required notice, then you are legally entitled to severance pay.

Also, an individual employee who is fired without notice may receive severance pay. A company will offer severance packages in exchange for a Release of Claims Agreement that you won’t sue for discrimination claims, unpaid wages, or wrongful termination. If the company’s restructuring or eliminating your position due to budget cuts or other needs, and your employment discharge is a result of these changes, this is another instance in which the company will offer a severance-package.

Contact Us, for a free consultation to review your severance package and how to negotiate severance pay.