We get a lot of phone calls about severance agreements. This video is meant to help people understand what the terms and conditions mean in their severance package. The video will help you understand what you are giving up in exchange for the severance deal.
This video also explains the common terms that people will encounter in a severance package. It will help you understand if you need to hire a lawyer for a lawsuit or for a detailed review of your agreement.
This is our third major video on the topic of severance. Here are links to the other two:
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How do you know if your severance package is fair or not? Did they offer you enough money? Are you getting ripped off? What does all that legal mumbo-jumbo in the agreement actually mean? This article and video will answer most of your severance questions and explain your options.
Severance deals in California come in all shapes and sizes, and most people find the contract terms to be very confusing. The only way to properly determine if you’re getting a good deal is to have an employment lawyer do three things:
Review the actual contract,
Carefully examine the facts and circumstances surrounding your termination and employment, and
Explain which of the four options (more on those below) is best for your situation.
Unfortunately, lots of people call me after they’ve signed a severance agreement for a few thousand dollars, only to discover that they had a case worth hundreds of thousands of dollars. Don’t be one of these people. Before you sign, have an employment lawyer like me do a severance review.
This article and video will go into extraordinary detail on severance agreements, negotiation, and lawsuits. I highly recommend that you watch the below video and read this article in full before you decide to sign a severance agreement.
If you’re in California and you already know you need a lawyer to review your severance package, contact us here.
Watch this Detailed Video on Severance Value, Fairness, Negotiation, and Strategy
You Have Four Ways to Respond When Presented with a Severance Agreement
As I explain in the video, when you’re terminated and then presented with a severance offer, you have four options how to respond:
You can ignore the offer, find a new job, and move on with your life.
You can accept the severance package as it was offered, sign it, and collect your money.
You can try to negotiate for more money or better contractual terms.
You can reject the severance offer and file a lawsuit against the company (assuming you have a good case).
How do you choose which one is best for you? Just like any difficult decision in life, you need to weigh the options against something. If you don’t have anything to compare these choices against, you can’t possibly make an educated decision. Keep reading to learn how to compare these options.
To Pick The Right Option, You Need to Answer These Two Questions
You need to figure out what you are giving up if you sign the severance agreement. While there are a lot of important terms and conditions in the severance agreement (more on those below), I’m going to focus on the main one here.
When you sign the severance agreement, you give up your right to sue the company for employment violations. Therefore, before you sign, you should have an answer to these two questions:
Did the company violate the law when they terminated you or during your employment?
If the company did violate the law, how much money could you recover by taking legal action?
The only way to get an honest idea of the answer to these two questions is to have an actual lawyer examine the facts surrounding your termination and review the terms of your severance agreement. Once you have an idea of how much money is at stake and the strength of your legal claims, you can compare it to the severance offer and make an educated decision.
You Must Also Examine the Risks Associated With Each Option
While this might seem obvious in theory, reality is far more complicated. It is almost impossible for a non-lawyer to come up with educated answers to the below questions. Regardless, here are questions that should be circling around in your head:
How much money is my case worth?
How strong (or weak) are my legal claims?
Will they pull the current offer off the table if I try to negotiate?
Will I make a mistake during negotiations and torpedo my case?
Do I actually understand what is in the contract?
What are the chances they will respond to my counter offer with something fair?
How much stress is this going to put on me and my family?
Will this hurt my chances to get a good reference?
If I make a mistake in my negotiation, will I get sued for extortion?
If I sign this agreement, am I inadvertently putting myself in legal jeopardy?
Unfortunately, most individuals tend to underestimate the risks they face. Since every case is drastically different, and employment law is so vast and complicated, the only way to get a genuine picture of the risks that you face is to have a professional analyze and explain them to you.
What Terms are Contained in Your Severance Agreement?
While most severance agreements contain these basic building blocks, every single one is different. So read your contract carefully! If you do not understand parts of your agreement, I strongly recommend that you have it reviewed by a lawyer.
But for purposes of this article, here are some of the major terms:
You agree not to say anything bad about your former employer (a.k.a. the non-disparagement clause). This provision is especially dangerous if it contains a liquidated damages clause (this is a monetary penalty that you incur for each violation of the provision).
You cannot tell anyone about how much money the company paid you in severance (a.k.a. the confidentiality clause).
You lose the right to sue for violations of law that you don’t even know about yet. This isn’t 100%, however, as you cannot legally waive some claims (like a workers compensation claim).
You usually re-affirm and agree not to discuss the employers trade secrets, secret business practices, and customer lists. This can cause serious problems down the road if you plan to continue working in the same industry or for a competitor.
You usually agree to “cooperate” with the employer down the road if they need assistance with things that arose out of your employment. This usually means you agree to assist the employer if they get sued by someone else. Yikes!
You usually also have to agree that, by accepting the money, the contract does not amount to an admission of wrongdoing by the employer.
Obviously, there is more to the agreement and each agreement is different. But most of the agreements that I’ve reviewed have these terms.
Why is Your Employer Pressuring You to Take the Severance Deal?
Simple, they want to avoid a lawsuit. In today’s litigious world, employers offer money to “problematic” employees at termination in an effort to buy their way out of a lawsuit.
Employers are not required to offer severance. It is not a legal right. Just because your company offered severance to one employee, doesn’t mean they have to offer it to you.
But therein lies the rub. Why is the employer offering money to you? Why didn’t they just fire you? Here are some common reasons:
They are worried that you have good legal grounds to sue them, and they are hoping you’ll take the quick cash and move on.
They have a company policy that they offer severance to everyone, and you’re just the latest person to get laid off.
The employer specifically thinks you are a problematic employee, and they want you to go away. The severance payment is a just a carrot to get rid of you.
You may have witnessed something unlawful at work and they want to buy your silence.
We often hear stories about employers terminating a worker, and pressuring them to sign the severance deal right there in the termination room. Don’t do it!
We recommend that you say to them, “Thank you, but I’m going to take this home and read it fully before I sign it. If there is anything I don’t understand, can I email you questions?” Then, once you get home, contact a lawyer for a severance review.
Conclusion
If you’re a California employee and you have decided to have a lawyer look at your severance agreement, I hope you’ll consider hiring my office. You can contact us here.
If you have decided to negotiate on your own for more money (we don’t usually advise this), we have an entire webpage on this. Please watch the video on this page carefully before you decide to take this route.
This whiteboard video is how people can increase their leverage and negotiate for more severance money after a termination.
Let me first say that you should absolutely have a lawyer review your severance agreement. My office does severance reviews all the time for people. But when the severance package is extremely small, or you’re 99.9% sure the company hasn’t broken any laws, you can try to negotiate your own agreement.
Second, you should watch the above video before you read the rest of this page. The video provides an excellent backdrop and the rest of this post will make a lot more sense if you learn the fundamentals.
There was more I wanted to include in the video (but I had to get back to work). So, I’ve added some information in this blog post to further flush out the bargaining chips. Employees can use these bargaining chips to negotiate for more money with their employer.
Offered Severance? Beware!
While it’s practically a taboo subject in our modern, work-driven world to admit to being fired by an employer, there’s something to be said about knowing the right way to be fired. This is particularly true if there’s a severance package being offered as part of the termination. What you do at the moment a severance check is slid across the desk toward you along with legal documents to sign could turn calamity into financial opportunity — depending on how you play your cards.
That said, there are those of us in the employment law business who probably wouldn’t object to schools teaching a class on how to get fired correctly. But barring that, the video attached to this post might just be the next best thing.
The truth of the matter is, whether we’re talking about sports, personal relationships or career, there are going to be days when we win, and days when we lose. What matters most when we lose is how we handle the situation. If it all possible, the goal should be to turn a negative into a positive.
While an employer might offer a severance package as a means of buying cooperation from a difficult employee, if you’re that employee the goal shouldn’t be to act like a big jerk in the hopes of getting a bigger severance.
The following is a list of things an employee should consider before signing a termination agreement.
More Severance Negotiation Tips
Remember, You Don’t Have to Sign
When an employee is terminated and they are given legal documents to sign, the company is looking to cover its rear and avoid a lawsuit. There could be any number of reasons an employee is fired. In an “at-will” state like California, it could be for no reason at all.
But employers know that lawsuits, even if they can be won, are expensive. So they often ask terminated employees to sign legal documents giving up their right to sue before leaving the premises. This can seem demeaning and dehumanizing. The good news is, you are not legally required to sign. You can refuse if you want.
But as mentioned earlier, the termination process should be seen as an opportunity to turn a negative into a positive. If you don’t sign, you’re basically closing the door on any severance pay – but you can pursue legal action. So if you plan to sign, be prepared to negotiate.
Don’t Rush It
There are times when companies will tell an employee he or she is fired, and place a severance check in front of them and pressure them to sign the termination contract immediately. If at all possible, tell them you’d like to take a day or two, or even a week to consider the terms. If necessary, if you find something fishy with your firing, you should take this time to discuss the terms with friends and family and have the severance agreement reviewed by a lawyer.
Non Disparagement
Those who follow silicon valley news might remember in 2011 when Yahoo fired then CEO Carol Bartz. She was granted a large severance package—around $14 million. Not surprisingly, there was a non-disparagement clause in Bart’z termination contract.
But in an interview with Fortune Magazine following her termination, Bartz publically referred to Yahoo’s board as “doofuses” with some other expletives sprinkled in for good measure.
Now, this was an incredibly risky move on Bartz’s part. and, the company was probably within its rights to withhold her severance. It doesn’t look like that happened, but with that kind of money on the line, was it really worth it to risk the loss just to take a couple parting shots at the company?
Outplacement Services
Another thing you might consider negotiating for is outplacement services. Outplacement companies, which are located all over, help employees with career transitions. These companies often help employees who have had a difficult time at a previous employer articulate the reason for their departure so that they can find more success when interviewing with the next company. They also provide resume and other coaching services. If your former employer can help you move on with your life, why not take advantage of that.
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Cell Phones and Laptops
Often times terminated employees don’t see the company laptop or cell phone as something to be bargained for. But as anyone who’s purchased these items knows, they can be expensive. Companies will often let these gadgets go with the terminated employee. Depending on your specific situation, it could be something worth taking a look at.
Employer Reference
If your employer does agree to give you a glowing reference, you’ll definitely want to get that in writing in some form. Whether the employer agrees to offer a positive reference as part of the severance contract, or just provides you with a signed letter of recommendation. Whatever the case, it’s important to get it in writing. A reference is the kind of thing that can be agreed to in a casual conversation, but when the time comes to actually provide that reference, days weeks, months down the road, it’s easy for an employer to brush it aside.
Employment rights must be addressed immediately. The window for legal action may close if you don't act. Call or contact Mr. Robertson for a free consultation.
