A severance package can include a variety of benefits, but each situation is different. Not all examples of job loss or termination are going to result in severance pay.
No job is going to last forever. There may come a point in time when your employee decides to leave. Maybe they are relocating for a new job, or perhaps they are retiring. Severance agreements are often included when an employee leaves, particularly if they have been there for a long time.
It is important for everyone to be aware of their employment rights, particularly following a layoff, and that means understanding several severance terms. What do you need to know about severance packages, and how do they impact employee rights?
Understanding Severance Agreements
First, it is important to understand what a severance agreement is. Lots of people are aware that a severance agreement typically comes with money, but this is not free money. Generally, a severance package refers to a set of benefits, which could include some compensatory pay, in exchange for releasing the company against all future claims that might be brought by the employee.
When someone has been with a company for a long time, there are a variety of situations that could result in their termination. Maybe they are retiring, or perhaps they are being laid off. A lot could have happened during the time that the employee was with the company, and some of those issues could result in claims. There are plenty of situations where employees wait until the end to bring a claim against a company because they do not want to jeopardize the status of their job. If someone knows that they are already leaving the company, they might feel like they have nothing left to lose, so they could bring a claim.
A way for the company to prevent this from happening is to provide a severance agreement. Then, the employee releases the company against all future claims in exchange for a severance package.
It is important to note that employees should read the severance agreement carefully. Companies are not allowed to withhold pay for hours that have already been worked in exchange for a signature on a severance agreement. Any money included in a severance package should be beyond the base pay the employee receives for hours he or she has already worked.
Negotiating a Severance Agreement
There are several tips employees should follow when they are in the process of negotiating a severance agreement. Some of the most important tips to follow include:
Do not sign the agreement right away. Instead, you need to take some time to read the agreement carefully.
- It is easy to focus on the amount of money you are receiving. Instead, focus on all of the other components. You will probably be signing away your right to file a lawsuit against the company, and they might even be asking you to sign a non-compete.
- Have the agreement read by a lawyer before you sign it. That way, you understand exactly what you are signing.
- Take a look at your initial offer letter and ensure the severance package does not conflict with any element of the severance agreement.
- If you are losing health insurance immediately, you may be able to negotiate to have your health insurance extended. Or, you might be able to ask for a larger amount of money to cover potential out-of-pocket medical expenses.
If you keep these tips in mind, you should be able to protect your rights and sign a favorable severance package.
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Do’s and Dont’s of Severance Agreements
If you have been asked to sign a severance agreement, there are several do’s and don’ts you need to think about. They include:
- DO NOT Feel Pressured: It is not unusual for some employers to pressure their employees into signing the agreement as soon as possible. Do not let yourself be bullied into signing the agreement right away. You are allowed to take the agreement home to review it, and you can also talk with a lawyer if you would like.
- DO Consult With a Professional: Speaking of lawyers, you should ask for a lawyer to review your severance agreement. There will probably be a lot of legal jargon in the agreement, and you should make sure you understand exactly what you are signing.
- DO NOT Hesitate To Negotiate: Do not view the severance agreement as non-negotiable. There are certain elements you can negotiate, and you need to think carefully about what you should ask for.
- DO Get Creative: If you decide to negotiate, you need to be creative. For example, you might want your health insurance to be extended, or you might want a positive employment reference. Even though you can certainly ask for more money, you might have better success if you think outside the box.
- DO Think About Legal Claims: If you decide to sign a severance agreement, you will probably be waiving your right to file a lawsuit in the future. You must think about all potential legal claims you might bring against the company before you sign away this right.
If you think about these do’s and don’ts before you sign your severance agreement, you maximize your chances of a favorable outcome.
Ensure You Have Clear Severance Agreements and Rights in Place
Layoffs can happen from time to time, and it is important for everyone to be familiar with legal rights under employment law. Regardless of whether you are signing a severance agreement or drafting one for an employee, you need to make sure you comply with all rules and regulations.
That is why it is important to reach out to a professional who can help you. At the Dental and Medical Counsel, and it would be their pleasure to help you address issues related to severance packages. There are lots of benefits severance agreements provide for both employees and employers. If you would like to learn more about how they can help you, contact us today.
