Usually for executives or managers, and unlike an at-will employment arrangement, most employers offer an initial employment severance agreement defining the terms for leaving a company after termination. While most companies offer severance, they are not required to do so; state laws vary, and it is not required under the Fair Labor Standards Act. Executives generally have negotiation leverage because of their financial and personal contributions made over the employment period. There also will often be bargaining room because employers want to maintain a positive reputation or may not want you to work for or share secrets with competitors. Typical severance packages offer one to two weeks of paid salary per year worked. Continuation of insurance benefits, assistance finding another job, and other perks can be negotiated. You usually have 21 days to accept a severance agreement, and once it's signed–seven days to change your mind.
Below are ten steps (and three “pre-steps”) one should follow to make the most of a severance package.
PRE-STEPS (BEFORE TERMINATION)
- A perfect time to alleviate a potential job loss setback is during an initial hiring interview; you should discuss then whether and/or how the company offers severance.
- Stay prepared at all times for a job termination by keeping a track record of your performance and accomplishments.
- Stay informed of any employer updates to workplace policies, especially the severance agreement.
10 STEPS (POST-TERMINATION)
AT A TERMINATION MEETING
- If you are dismissed, take notes during the termination meeting.
- Don't feel pressured to immediately sign a severance agreement.
CONSIDER RETAINING AN ATTORNEY
- After an initial review of the agreement, consider hiring an employment law attorney regarding its terms because of potential future financial and legal implications.
- Strongly consider hiring an attorney if you have evidence of discrimination, if the language in the package is too complicated or broad, or if the agreement is several pages long.
DO YOUR RESEARCH
- Research reasonably expectable company severance benefits. (An employment law attorney may also have a sense of what has been offered to others in your former company.)
- Talk to placement and recruitment agencies to determine how long it may take you to get a comparable new job.
ASK YOURSELF SOME QUESTIONS
- Ask yourself:
- What is your value to the company?
- If you have a revenue-generating role, quantify your quarterly and annual contributions.
- Define any other financial and personal contributions.
- Once you’re let go, will they terminate your position or hire someone at a lower pay rate?
- Document why you deserve more financial cushion, i.e. a package with a longer length of time, or for full pay and benefits. If the job loss will create an economic hardship, discuss this with your (former) employer.
- If your employer’s proposed package is inferior to your proposal (say if the number of weeks is based on years of company employment and can't be changed), negotiate substitutes like an insurance benefit continuation, job search help, or other perks that may be more negotiable.
- Make it appealing for your employer to give you the best severance package available at the company. For example, you can offer to return for freelance or consulting work, saving the company money in the transitional period.
Cotchett Pitre and McCarthy regularly represents professionals, executives, and other highly compensated employees in compensation, bonus and commission disputes, breach-of-contract cases, and severance negotiations. CPM has represented clients against Silicon Valley technology companies where the issues included equity compensation and the valuation of stock options. Where involuntary terminations are involved, CPM’s attorneys are skilled at identifying violations of the law or breaches of contract and utilizing creative approaches to leverage the facts in favor of our clients.
For general information about CPM’s Personal Injury Litigation practice, see: https://www.cpmlegal.com/practices-Executive-Severance-Negotiations