Top 10 Reasons You Need a Lawyer to Review Your Severance Agreement
You’ve lost your job! The reasons are many in today’s economy; could be because new management came in and wanted to start fresh with their own team; could be for poor performance; could be because of a plant closing or the dreaded “reorganization”. The unfortunate fact is that for whatever reason, your employment association with your prior employer is coming to an end. Is a severance package being offered to you? Do you know what to look for to make certain you’re being treated fairly? You need to be careful because tied to that pot of gold at the end of the rainbow will be a promise by you to give up all your rights to sue your former employer.
In its most basic terms, a severance agreement is a written contract between you and your employer outlining post termination benefits and promises by each party. An employer is under absolutely no obligation (unless called for by contract) to provide its terminated employees with severance. Also, while the rule of thumb, in the good old days before the economy tanked, was 2 weeks of severance for every year of service, that guideline has gone out the window and there are no set parameters for what constitutes “normal” severance pay. The amount of severance being offered can depend on the financial stability of the company, your years of service, any special skills you may have, and the particular industry you are in. There is no law in Illinois that says an employer MUST be kind to you on your way out the door.
Trust me, if an employer decides to offer you a “package” when you leave, there is one big string you must be aware of. When you sign off on the enhanced benefits you are receiving, you will also likely be signing a waiver and release of any and all claims you may have against your former employer based upon any mistreatment you were subject to under the law. You can try to negotiate a better deal on your own, but beware of two things. First, if you try to negotiate on your own, the employer may pull the offer off the table. Your employer, having made the decision to cut you loose from the company has already formed an opinion of you and your worth, and its likely not positive. Second, if you are not aware of what should or should not be in the agreement, you might be leaving things on the table to your detriment. It’s a tricky balance. That is why an experienced business attorney can help guide you through the minefield you may be walking into and avoid any missteps along the way.
Listed below are our top 10 reasons you should have Boznos Law review your severance agreement.
- The Severance Payment: If you are already entitled to severance pay, because of a contract or established company policy there is no need to sign the severance agreement which will contain the release and waiver the company wants from you. Severance is something over and above what you are already entitled to. We can help ensure that if you do sign the agreement, it contains more than the severance payment you are already entitled to. In addition, we can help you get a sense of whether the severance amount is consistent with industry standards for your particular situation.
- Make Sure You Get What You’re Already Owed: If you have unreimbursed expenses or are entitled to vested benefits (such as unused vacation days earned or other benefits you earned prior to your separation) you are entitled to those amounts regardless of whether there is a severance agreement or not. Often times a severance agreement will state that the employee has been paid all monies due him or her. If that’s not the case, the severance agreement should indicate the date certain by which the employer will be making these owed payments.
- Employee Benefits: A severance agreement should explain what benefits the employee will receive after separation from the employer. Often times, if severance will be paid out over a period of time, it might be possible to negotiate and extension of those health benefits during the period of the severance payout, in addition to any COBRA rights an employee may be entitled to.
- Release of Claims: An employer is giving you a severance payment in return for your promise not to sue the employer for any past wrongdoing. The releases that are contained in severance agreement usually require an employee to give away the store. We fight for your rights and strive to make the release more balanced, for instance, by making the promises not to sue mutual, so that your former employer promises not to come after you for any wrongdoings you may have committed. There are also several claims and entitlements that you cannot or should not release under the terms of a severance agreement. For example, you cannot waive your rights to file a claim for worker’s compensation due to a work related injury suffered during the time of your employment. Similarly, you cannot waive your COBRA rights. You cannot waive your right to participate in any investigative matter filed by the EEOC. You should not waive your right to seek unemployment insurance benefits in an uncontested manner. You cannot waive your rights to receive vested benefits (such as accrued and vested pension benefits, stock options restricted shares or other benefits provided by company plans. You should not give up your right to enforce the severance agreement if your employer should default in making any required payments. Finally, you should never waive indemnification for claims made from third parties against the former employer.
- Non-Disparagement and References: Severance agreements usually contain language that states the former employee will say nothing disparaging about the former employer or any of its management or employees. We can assist in negotiating that this applies both ways. Similarly, references are importance going forward and it should be decided in advance what can and cannot be said to, and by whom, to one of your potential employers.
- Make Sure It Contains Everything !: A handshake deal, or an under the table understanding that certain things will or won’t happen is not good enough. Any oral agreement or promise an employer makes will not be binding unless it is contained in the four corners of your severance agreement. We can make sure that all an employer’s promises and obligations are clearly set out in writing so they can be honored and you’re not “out of luck” because it wasn’t written into the agreement.
- Proprietary Information: The use of proprietary information by a former employee in their future endeavors is something an employer will try to restrict. We can work with you to identify and document the return of all confidential and proprietary information at the time your severance agreement becomes effective. An employer that later asserts you have kept and are using confidential or proprietary information will have to overcome the fact that you have agreed, and your employer acknowledged, in the severance agreement, that you do not possess such information.
- Restrictive Covenants and Agreements Not to Solicit: Depending on the amount of time worked for an employer and the consideration received, many employees may be bound by non-compete or non-solicitation agreements created in employment contracts or other free standing agreements. Usually, these agreements seek top preclude the former employee from competing against the employer in a certain geographic area for a certain lime period or from contacting or soliciting customers or employees of the employer. Where these restrictions already exist, we make certain they are not expanded. If an employer is insisting on adding these restrictions into the severance agreement (where there was no obligation before), we work to limit the time and scope of the restrictions to be commercially reasonable under the circumstances.
- Confidentiality: All employers want to make certain that the terms and conditions of a severance agreement do not become public knowledge. This is for a variety of reasons. First, employers do not want employees knowing how much or what other benefits one employee received so another may not try to negotiate a similar or better deal. Secondly, an employer does not want to send a signal to its workforce that it is willing to provide severance at all. However, our experience has been that we are able to carve out certain individuals (immediate family, lawyers, accountants and tax advisors) who can be provided knowledge of the agreement’s contents. Additionally, there should also be a carve out if the employee receives a subpoena, he or she will be able to testify fully and openly in court, regardless of any confidentiality restrictions.
- Cooperation: Under the terms of a severance agreement, a former employee may be required to cooperate fully in any legal proceeding or other investigation involving the former employer. Often times this level of cooperation can be scaled back to one of “reasonable” cooperation that suits the former employee’s new schedule, and create a right to receive sufficient notice of what is being asked of the employee. Also, the agreement should contain language stating that if the former employee incurs any charges or expenses (travel, legal expenses, the cost of his or her time etc.) that the employer will fully reimburse the employee for such out of pocket expenses.
With over 30 years’ experience in advising employers and employees on workplace issues and estate law, let Boznos Law work with you to ensure you are ready to meet the challenges posed by severance agreements. Call Bill Boznos today at (630) 375-1958 or contact us through our website at www.boznoslawoffice.com