I get several calls from employees that are unfortunately getting let go or terminated from their company. Every client I go through this type of analysis to help them decide whether accepting or not accepting a severance is the way to go:
- Waiver of Legal Claims – A company doesn’t give severance out of the goodness of their hearts. They are buying the assurances that you will not sue them for any number of potential legal claims stemming from your termination. Those legal claims include but are not limited discrimination, harassment, unpaid wages, retaliation for opposing illegal activities, and claims for unpaid bonuses. When you get a severance agreement you should do some online research or talk to an attorney to help figure out whether you have potential legal claims that might be worth more than the severance. Also, an employee should make sure that the money they are accepting would actually disqualify them from getting additional money they were supposed to get through bonus programs with the company.
- Enforcement of Non-Compete Claims – Many severance agreements include provisions that could cripple an employees ability to seek other work. An employee needs to examine non-compete provisions in a severance carefully to make sure they are not going to affect their future job prospects too much.
- Willingness to Litigate – I rarely will take on a client who wants to challenge their severance agreement without being willing to litigate the case if the company is unwilling to settle. A client gains leverage to negotiate a higher severance when he or she has good legal claims and is not afraid to assert them if necessary. A client who just wants an attorney to write a threatening letter is not going to get the best value from the attorney. Likewise, an attorney is also not doing a client favors by agreeing to write a letter when he or she doesn’t believe in the legal claims. Thus, I suggest that any employee be prepared to litigate their claims if they truly want to challenge their severance payments.
- Moving On – This is a conversation I have with all my clients. At a certain point, there is a benefit to just signing the agreement and moving on. Typically, I advise clients to move on and sign if they already have another job lined up, they don’t have many strong legal claims, and they don’t have the willingness to litigate if they don’t get what they want from the company.
To summarize, before signing any severance agreements make sure to think about the points I go over above. If you have any doubt about your legal claims its always advisable to seek counsel. The money you spend an attorney like myself or others who do similar work can at the very least help you make an informed decision about whether to sign that severance agreement.