You may think you want a mutual non-disparagement clause in your severance agreement, but you probably don't need it.
It has to be tempting to sign a severance agreement right away. You were just terminated, you are probably wondering about how you are going to pay bills, make ends meet, find your next job, etc. The severance you’ve been offered seems like a lifeline. Maybe it is...
But You Should Never Sign a Severance Agreement Right Away.
Your severance agreement was written specifically to help your employer – not you. Thus, your severance agreement makes you give up nearly every right you have under federal, state and city law, like claims for discrimination, breach of contract, defamation, unlawful termination, human rights violations, and certain wage payment laws. The agreement may also prevent you from working for a similar employer, from contacting your former co-workers or clients, and making certain statements about the company.
Your employer also drafted the severance agreement to protect itself in the event that you breach. For example, your agreement probably permits your employer to seek “injunctive relief” or to seek attorney’s fees in the event of a breach of the agreement (but does not permit you to seek attorney’s fees if the company breaches).
Your employer also drafted the severance agreement with an offer of payment. That offer may not properly value the claims you are giving up, your contribution to the company, or your personal circumstances. When I used to advise companies about how to draft severance agreements, I would always give them the following advice:
“You should offer the minimum amount that this person would accept to shut up and go away forever.”
Still Think You Should Sign Right Away?
Why not speak to a severance lawyer? Granovsky & Sundaresh specializes in severance agreements. We offer two services in this regard. First, we can review your agreement with you paragraph-by-paragraph to make sure that, at a minimum, you are an educated consumer. For some clients, however, we also negotiate severance.
Our Pricing For These Services is 100% Transparent:
- For review and consultation, we charge a flat fee - $600. This fee includes a complete review of your agreement, assistance with revising the agreement if necessary, and a bank of time for issues that arise in the future (e.g., if a non-compete issue comes up in the future, we will consult with you on this as well).
- For negotiation of severance agreements, we charge a contingency fee of 1/3 of the monetary improvement we attain for you. There is no fee unless we improve your severance.
Yes, You May be Able to Improve Your Severance
We specialize in negotiating severance agreements. We have improved our clients’ severance agreements in 91% of our cases (as of April 1, 2017).
You owe it to yourself and to your career to understand and improve your situation.
Contact us today. Call 646-524-6001. You will be speaking to an specialized severance attorney within 24 hours.
Our firm specializes in negotiating severance agreements for recently terminated employees. We’ve negotiated severance agreements all over the country from our offices in New York City and Cleveland. Since we formed our firm, we have improved severance for over 93% of our clients. You can read our reviews on Google, Avvo, and Yelp.
When we talk to our clients about severance, we generally go through the below checklist. We don’t always discuss every bullet point with every person, but this should provide a general overview.
· Is it Fair? Here’s the basic transaction: in exchange for severance (money) the company is getting you to promise not to sue them (and sometimes a bit more). Are you getting fair value for your promise? That depends on what your promise is worth – in dollars and cents. It also depends on common sense. How much did you give your company in blood, sweat and tears? Is that being valued (it does not have to be – but it should)? We work with clients to help them better understand if their offer is fair and help them work towards a more equitable deal whenever possible.
· Reason for Termination. This is a big one. If you believe that the company terminated your employment for an illegal reason (e.g. discrimination, retaliation, etc.), the claims that the company is asking you to release can be quite valuable.
· Potential Claims. Like your reason for termination, if your employer violated the law, you have viable claims against the country. We discuss whether each employee was properly compensated for all time worked, and also explore whether the employee has viable claims under OSHA or Dodd-Frank.
· Confidentiality. Map out what is and what is not confidential. While a company certainly wants to keep its trade secrets (and secrets generally) private, you need to be free to describe your work to potential employers, etc. Plus there may be certain aspects about your employment that you want to be kept confidential.
· References. Severance is about your future, so working out how your references are going to be handled is critical. A neutral reference usually covers this, but, sometimes, you can iron out a reference letter from your former employer which you can then present to potential employers. These are fairly rare, but that does not mean you should not look into it in certain circumstances. Here is an article on neutral references.
· Personnel File. You may want an opportunity to review and/or copy your personnel file for your records. A personnel file would typically contain information about your pay, benefits, and performance. Even if you cannot get access to your entire file, there may be some information about your employment (salary, benefits, accrued vacation, etc.) that you may want to know. Think through what information you want.
· Return/Retention of Company Property. Most severance agreements require employees to return all company property. But what if you’ve grown attached to your company-issued laptop or smartphone? Do you have important personal information on your work e-mail account? Think through what you might want to keep.
· Restrictive Covenants. As noted above, severance is about your future. Restrictive covenants (non-competes, non-solicits, etc.) can have a major impact on what you are allowed to do after your employment has ended. If you are subject to a restrictive covenant, your severance agreement may be a good place to revisit the issue. But you have to be delicate when you address this issue – nothing says “I intend to compete with the company” quite like saying “I want to talk about my non-compete agreement.”
· Other Pay. Don’t leave any money on the table. Make sure all of your earned wages, commissions, vacations, sick leave, etc. have been paid. Figure out your pension, 401K and benefits. Make sure that you get everything that you’ve earned.
· Stock Options. When are your stock options exerciseable? Separation from the company may accelerate the time. Also, if you have acquired stock, majority shareholders may owe you a fiduciary duty to disclose material info about the company stock. You may be able to force the company to repurchase the stock.
· Future Relations. Can the company hire you back? Can you be a consultant, or independent contractor for the company? Does getting another job (with the company or another company) impact your severance?
· Taxes. Talk to an Accountant. Figure out how your severance is going to be taxed. Typically, severance payments are taxed as wages, but not always. Clever accountants are great at coming up with creative solutions to tax issues related to severance.
If you think you might want to talk to a lawyer about negotiating your severance, please contact us – this is what we do.
Never sign a severance agreement before you completely understand it. A severance agreement can impact your future opportunities, your earning potential, and even your overall career trajectory. Keep in mind, your severance agreement was written by and for your employer – not for you.
Most employees who are offered severance should hire an experienced severance attorney to conduct a thorough severance review for several reasons.
- Your agreement may create responsibilities that you are not aware of. Some agreements require an employee to be available to assist with transition or other duties as part of their severance.
- Your agreement might limit what you can do in the future. Some agreements impose restrictions on an employee’s ability to work for competitors, or solicit clients or co-workers.
- Your agreement might not properly compensate you to give up your rights. Your former employer is not paying you because it is nice. Your employer is paying you not to sue. But without a thorough understanding of your legal rights, you might not know what you are being asked to give up – let alone what the lawsuit you are agreeing not to file might be worth.
Severance review by an experienced attorney can help you avoid these and many other potential pitfalls. Yes, severance review costs money, but your career is worth it. If you have any questions, please feel free to contact us. An attorney will get back to you within 24 hours.
Short Answer: Probably Not. Keep in mind, an employment lawyer is writing this – I’m biased!
If you are offered a severance and want something more, it is time to negotiate. Many people hire employment attorneys to negotiate on their behalf. Others try to do it on their own. There are advantages and disadvantages to doing it on your own. Below is a breakdown.
Advantages of Negotiating Your Own Severance Package:
It’s free! If you hire an employment lawyer to do it for you, chances are there is a fee involved. For what it is worth, my firm, Granovsky & Sundaresh charges a small flat fee plus a percentage of how much we improve your severance. But pretty much no matter which lawyer you hire, there is something coming out of your pocket. On the other hand, if you do it yourself, it’s free.
It may be the best way to leverage personal equity. Imagine a situation where an employee has been with a small company for 25 years. The higher ups in that company probably know about the employee’s personal life, family, etc. That employee can negotiate for severance based on his or her individual situation and personal equity/goodwill with the company. “I need it to support my family” may sound more compelling from the employee than from an attorney.
It’s fun! Negotiating is fun. It is you against the company pushing for more. It is stressful and exciting, but it can be fun. Waiting to hear back from your lawyer, on the other hand, is stressful and boring.
Disadvantages of Negotiating Your Own Severance Package:
You don’t know what the heck you’re doing. Unless you’ve negotiated in the past, chances are you are not a great negotiator. Common mistakes that people make when they negotiate for themselves include: making their ask too high and ruining credibility, making their ask too low, and ruining their bargaining flexibility, not realizing potential sources leverage that could increase bargaining power, and, finally, taking a hostile stance which stymies negotiations. Granovsky & Sundaresh has negotiated hundreds of severance agreements. We love this, it’s what we do, and we get results.
You may take it too personally. Severance should focus on setting the employee up for a brighter future, not quibbling over the past. While what happened during employment is certainly important, what matters most is the future. An employee who was recently let go is often hurting, embarrassed and angry. These are natural reactions, but these emotions are often counterproductive to efficient negotiation.
Attorneys make you a more viable threat. The document your company wants you to sign is not just a severance. It is a severance agreement and release. The “and release” part is why you are getting severance to begin with. In exchange for severance (usually money), you are releasing (promising not to sue) the company. In other words, the company is paying you to go away peacefully and not sue them. If you hire a lawyer to negotiate your severance, the possibility of you suing the company becomes a lot more viable. This is especially important if you have potentially viable claims against your company. Which bring us to our next disadvantage …
Attorneys can parse out your legal leverage. Remember, the company is paying you not to sue them. Sue them for what? Often times, employees sign severance agreements and give up viable claims that they did not know they had. If you consult with an employment lawyer, you can parse out potential claims which an attorney can turn into leverage and then into money in your pocket.
Attorneys are awesome. We get a bad rap, but that’s unfair. Employment lawyers work hard to protect the working rights of all Americans. And a good employment lawyer will help to secure you a better severance. What could be better than that?