Even though they are not legally required, severance agreements are commonly used to smooth the transition when an employee leaves a company. These agreements provide clarity, help ensure a fair deal for everyone involved, and are one way companies try to avoid the risk of future litigation.

Whether the loss of a job was sudden or part of a mass layoff or reduction-in-force, a severance package can help soften the financial blow and ensure you have the support and benefits you and your family need. While they are often presented as a fixed offer, severance package negotiations are not uncommon. The severance agreement lawyers at Madsen, Prestley & Parenteau can evaluate the severance offer and help negotiate a severance package to better protect your rights and your future.

Understanding the Severance Package

Before accepting, negotiating, or rejecting a severance package, you must first understand what is included. The severance agreement may cover compensation, benefits, and insurance. If you work in an industry that provides deferred stock options or bonuses, you will need to understand your options and the benefits you may still be entitled to.

Because it is a contract, a severance package must include “consideration,” which means the employee receives something of value in exchange for giving up certain rights. This “something of value” must be more than what the employee is already entitled to, and may include additional pay or an extension of benefits. In exchange for consideration, the severance agreement typically includes a release of legal claims against the employer, such as claims for discrimination based on age, gender, race, national origin, disability, and religion, all of which are important employment rights guaranteed under various federal laws.

Benefits Typically Included in a Severance Package

A fair severance package includes several key elements that protect the employer and the employee.

For the employee, the separation agreement usually includes the payment of some amount of money that the employee is not already entitled to. In addition, some separation agreements include an offer to continue subsidizing the employee’s health insurance benefits for some period of time.

For the employer, the separation agreement usually requires that the employee release and waive all legal claims that the employee may have been able to assert against the employer and its related entities, including legal claims that the employee may not even be aware of.

In addition, most separation agreements contain provisions that are important to both parties. For instance, employers usually insist on provisions requiring that the employee maintain confidentiality relating to the terms of the separation agreement and that the employee not make disparaging or defamatory comments about the employer in the future. For their part, employees typically want an assurance that the employer will not make negative statements about them to future employers in connection with employment references or employment verification requests.

How to Negotiate a Better Severance Package

It is often the case that the terms of a severance package are not negotiable. However, in many situations, employees have the ability to negotiate better terms, and increased benefits, as part of a separation package.

Successfully negotiating a severance agreement requires a strategic approach. Knowing your rights, understanding points of negotiation, and strategically presenting your case can lead to better results.

• Start by reviewing the original severance agreement. Focus on understanding the proposed severance pay, continuation of benefits, and employee assistance information, as well as non-compete and non-disclosure clauses, release of claims, and other key terms.
• Your ability to negotiate depends on many factors, but the most important factor can be whether you possess strong legal claims that the employer is asking you to waive and release as part of the separation agreement. So, in evaluating your ability to negotiate a better separation package, it is critical that you consult with an employment attorney who can assess the strength, and the value, of the legal claims that you will be giving up if you sign the separation package. Other factors can also influence the negotiations over a separation package, including tenure, past performance, the company’s financial situation, and potential legal risks for your employer.
• Identify a fair value for the rights that you are being required to waive as part of the agreement. If you are being asked to waive and release all of your legal claims against the employer as part of the severance agreement, it is critical to assess the value of those legal claims before you sign the agreement and relinquish your rights. If your legal claims are worth more than the amount of the benefits that are being offered to you, then you are in a strong position to negotiate for more money and more benefits in exchange for your execution of the agreement. If the proposed separation agreement includes other terms that restrict your rights going forward, such as a non-compete agreement that can restrict your ability to obtain future employment and earn a living, then it is also critical to ensure that you receive a sufficient payment from the employer in exchange for such a restriction. There may also be opportunities to negotiate for other enhanced benefits, such as continuation of health benefits. Properly assessing the value of the legal rights that you are being asked to waive as part of the agreement is critical to any decision regarding whether to negotiate for better terms, and how much more you should be seeking as part of the negotiation. In order to properly make that assessment, it is critical to consult with an employment attorney with experience and expertise.

How a Severance Agreement Lawyer at Madsen, Prestley & Parenteau Can Help

Retaining legal counsel is essential to a successful severance package negotiation. The attorneys at Madsen, Prestley & Parenteau can identify specific circumstances that strengthen your position and negotiate with your employer to your benefit. Our severance agreement lawyers will carefully review your severance agreement, explain its terms, and identify opportunities to make it more beneficial for you.