An Attorney Review of Your Severance Agreement Can Ensure You Do Not Leave Money on the Table.
Many companies conduct employee layoffs for various reasons. They may need to change their company goals and remove an entire department. They may need to reduce staff due to a reduction in revenue. They may be selling the company and need to reorganize to complete the sale.
Whatever the reason, legal layoffs are a normal part of company culture. While the law does not mandate it, many companies will offer executives and employees severance packages upon termination. They offer these separation agreements to protect themselves from lawsuits relating to discrimination and retaliation. However, they also offer them to keep up with the standard in their industry and attract top talent.
While a severance package may seem appealing, it may not be in your best interests to sign it. Therefore, you should have an attorney review your severance agreement before you sign and accept the offer.
What Is a Severance Agreement?
A severance agreement (also known as a separation agreement) is a contract between employer and employee. The agreement is offered to an employee upon termination from a job. The separation agreement is a voluntary document. The employer does not have to offer it, and you do not have to sign it.
A severance agreement will outline the terms of the benefits and pay you will receive after leaving your current position. Typically, it offers one or two weeks of pay for every year you worked for the company. However, since the law does not insist employers offer severance packages, it does not mandate the amount of severance you should receive.
Severance agreements may also outline the benefits you will receive after separation and the cost for the benefits. It will also let you know if you will receive your severance package as one lump sum or over an extended period of time.
In addition to outlining your benefits, a severance agreement may include provisions preventing you from filing a lawsuit against your employer for any unlawful actions, such as employment discrimination or sexual harassment. It may also include a non-compete clause, prohibiting you from working for any competitors for a period of time, and a non-disclosure clause, prohibiting you from discussing the severance package or anything related to the employer now or in the future.
Can I Negotiate a Severance Package Before Leaving a Company?
Any contract is always negotiable. If your employer offers you a severance package, the contract is negotiable. The first area you can negotiate is the amount of money you can receive in your severance package. While the standard package offers one to two weeks of pay for every year you worked for a company, some severance packages have been negotiated for up to four weeks’ pay for every year you worked for the company.
Leaving a job may cause extreme financial hardship for an individual and their family. For instance, when you are over age 40 and have only worked for the current company throughout most of your career, it may be quite difficult for you to find a new job paying a desirable wage. You may have grounds to negotiate for up to four weeks’ pay for every year you worked for the company in these circumstances.
- Negotiate Your Health, Life, and Disability Insurance
The law says that you have a right to receive health insurance benefits under COBRA for 18 months after you leave a company. COBRA allows you to pay the same premiums your employer pays to maintain the same health insurance coverage you had while employed. You have the right to negotiate that your employer pays for your COBRA coverage for a specified time period through your severance package.
Additionally, you may negotiate that your employer pays your disability and life insurance premiums for a specified time period until you find another job and can afford to continue paying the premiums.
- Negotiate the Non-Compete Clause in the Severance Package
If your employer tries to add a non-compete agreement in your severance package, review it with a fine-toothed comb. Negotiate the terms of the non-compete to ensure you can find valuable employment once you leave the company. Do not allow your employer to prevent you from working in related industries. Make sure your non-compete clause does not prevent you from even associating with customers and clients of your soon-to-be past employer.
Why Should You Have an Attorney Review Your Severance Package?
A severance package may seem wonderful on the surface. However, if you are not careful, you could sign away your rights for pennies on the dollar of what you are entitled to receive. Your package will likely prevent you from working anywhere near your current employer’s place of business. It may also prevent you from working in the industry you have grown to know and love.
Even if the severance agreement does not include a non-compete agreement, you may be asked to give up your rights to file employment discrimination or sexual harassment lawsuit against your employer for unlawful acts. If you are able and willing to give up this right, you must ensure you are being paid beyond adequately to make up for your losses.
An employment lawyer will review your severance package to ensure you are not giving up your rights without getting all you deserve in the end. They will help you negotiate your severance package to benefit you in every way possible. Without an attorney review, you may find yourself unemployed without any money coming in for much longer than you can endure.
Finally, your lawyer can help you avoid extensive tax burdens from a lump sum severance package. Instead of insisting that you take a lump-sum payment and go into a higher tax bracket, your attorney can help you negotiate an extended term to receive your severance package to help save you taxes.
Have Questions? Our Severance Agreement Lawyer Is Here to Help. Free Consultation (800) 807-2209
Recently terminated? Given a severance agreement? Do not let your employer force you to sign a severance agreement without an attorney review. Call the severance package attorneys at the Derek Smith Law Group in New York City, New Jersey, Philadelphia, Miami, and Los Angeles for a free consultation.
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