how to improve my severance package

Why You Should Never Sign a Severance Agreement Right Away

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.

Checklist for Negotiating Severance Agreements

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.

Severance and References

Typically, severance agreements handle employee references one of three ways.  Sometimes the agreement is silent on the topic of references altogether.  Commonly, severance agreements contain a “neutral reference” clause.  And rarely, they include a letter of reference.

What should I do if my severance agreement has no provision regarding a reference?  And what is a neutral reference anyway?

If your severance agreement has no language regarding how references to a future employer are handled, you should find out what – if any – company policies exist.  An increasing number of companies have strict policies stating that the only information they will provide is a neutral reference.  

A neutral reference is simply a statement regarding the positions you held and your tenure at the company.   Some large companies may use third party companies to provide neutral reference information for them.  So if your company has a neutral reference policy, you can relax and know that this how any potential reference inquiries will be addressed by your former employer.

If your company does not have a neutral reference policy, consider asking your employer to change the severance agreement to include a neutral reference clause.  Typically, employers are willing to do this because:  (1) a neutral reference does not cost the company any money and (2) they are only being asked to provide truthful information about your tenure and positions held.

Neutral Reference?  Doesn’t That Make Me Sound Bad?

A lot of people are afraid that a neutral reference will make them sound bad.  While we understand why someone might be concerned about this, it is often not worth worrying about.  First of all, so many companies have neutral reference policies, that these have become pretty standard.  Nobody reads into these any more.

Second, the purpose of a neutral reference is for a potential employer to verify your employment history (i.e. confirm that you are not lying on your resume).   Many companies hire third party background check companies who simply check your resume – a neutral reference is perfect for this.

Can Someone Say that I was Great?

Yes!  But that is on you. 

Talk to your former co-workers, supervisors, etc. and ask if they would be willing to sing your praises.  Obviously, this depends on your personal relationships, but that is outside the scope of your severance agreement.  When you are on the job hunt, reach out to your former colleagues, and ask them, “Hey, I am applying for a job at NewCo.  Would you mind if I listed you as a reference?” 

This is based on your relationships with your former co-workers.  And it is totally separate and apart from your neutral reference.

But I Want a Positive Reference!

Sometimes, a company will agree to provide a positive letter of reference with their severance.  This may make you feel better, but it is not always beneficial.  It is not always in your best interest.

As we mentioned earlier, neutral references are becoming more or less standard practice.  If a neutral reference is the standard, then what is an employer to think of a positive reference letter?  It might make your potential employer wonder what happened at the end of your employment.

Of course, it is much better than a negative reference (or no reference at all), so if you can get a positive reference letter, it is better than nothing.

What Should I Do?

Talk to a lawyer!  Granted, we’re biased, but transitioning employment is hugely important. It is a turning point in your life.  Surely it is worth investing a bit to make sure that the transition is as smooth as possible. 

 

The employment lawyers at Granovsky & Sundaresh PLLC have over two decades of experience dedicated to helping people through every employment law issue imaginable (and some unimaginable issues).  If you need us, we’re here to help.  Contact us today to schedule a consultation – your career is worth it.

 

 

 

Explain My Severance - Part 6: No Consideration Absent Execution Clause

Explain my severance:  What is it?

The No Consideration Absent Execution Clause makes clear that the money (or other consideration) the employee gets pursuant to a severance agreement is separate and apart from anything else the employee is otherwise entitled to.  For any contract (and severance agreements are contracts) to be valid, each party has to get something.  If the employee only gets what he/she is already entitled to (e.g. already earned wages, commissions, or bonuses), then that employee gets no consideration by virtue of the severance agreement.

Explain my severance: What does it mean?

The No Consideration Absent Execution Clause means that if the employee does not sign the agreement, the employee does not get the consideration laid out in the severance agreement.  This does not mean that the employee does not get what he/she has already earned, only that the employee gets nothing more.

Explain my severance: What's the point?

The No Consideration Absent Execution Clause is a fairly standard "bells and whistles" provision in a severance agreement.  It is there to provide evidence that the employee got something of value in exchange for their promises (agreement not to sue, disparage, or disclose secrets of the company, etc.).  Honestly, it does not add a lot of value, because ultimately, the company if a company has to defend a severance agreement, it will have to show that the employee received consideration regardless of a No Consideration Absent Execution Clause.  On the flip side, an employee should not expect to receive the benefits of severance if he or she is not willing to sign the agreement.

Explain my severance: The Upshot.

A basic principle of contracts is that each side has to get something for a contract to be valid.  Thus, if the only thing the employee gets is something to which he/she is already entitled, that employee did not get anything at all.  A No Consideration Absent Execution Clause makes more clear that the employee is getting something "extra" in exchange for his or her promises, and that he/she gets nothing if they do not sign.  The tough question is usually not whether the employee is getting something in exchange for signing a severance agreement, the real question is whether the employee is getting enough given the value of his or her promises (helpful article).

Sample No Consideration Absent Execution

If you need help with your severance agreement, please feel free to contact us.  We charge a reasonable flat fee to review your severance agreement and offer same-day service.

Read More:

Explain My Severance - Part 1:  The Release

Explain My Severance - Part 2:  The Neutral Reference

Explain My Severance - Part 3:  Non-Disparagement Clause

Explain My Severance - Part 4:  Non-Admission Clause

Explain My Severance - Part 5:  No Re-Employment Clause

 

Explain My Severance - Part 5: The No-Reemployment Clause

Explain my severance:  What is it?

The No-reemployment clause prevents a departing employee from coming back to the company.  This is part of the consideration that goes to the company.  In exchange for severance (money, benefits, reference, etc.), the company gets, among other things, a promise from the employee to go away.  And stay away.  The no-reemployment clause is the second promise - to stay away.

Explain my severance: What does it mean?

The no-reemployment clause is self-explanatory.  It says don't come back.

Explain my severance: What's the point?

The no-reemployment clause closes a "situation" for an employer.  It effectively closes the chapter on an employee.  There are many reasons that companies like these, but there are two primary reasons.  The first is the obvious, the employee is being paid to go away and stay away.  This justification is especially useful for problematic employees or when there is a contentious relationship.  The second reason is that is helps a company avoid liability for a later claim (by the same employee) for discriminatory or retaliatory failure to rehire.

Explain my severance: The Upshot.

It is the rare employee who is terminated and then wants to come back.  It is even more rare in the case of a no-reemployment clause.  The good news is that most companies retain the option of re-hiring an employee.  And this does happen from time to time.  If an employee has a good relationship with his or her former employer, nurtures that relationship, and an opportunity comes up, that company may still re-hire the employee even in the face of a no-reemployment clause.  For the most part, this clause simply gives the company an easy way to say no.

Sample Non-Admission Clause

If you need help with your severance agreement, please feel free to contact us.  We charge a reasonable flat fee to review your severance agreement and offer same-day service.

Read More:

Explain My Severance - Part 1:  The Release

Explain My Severance - Part 2:  The Neutral Reference

Explain My Severance - Part 3:  Non-Disparagement Clause

Explain My Severance - Part 4:  Non-Admission Clause

 

Explain My Severance - Part 4: The Non-Admission Clause

Explain my severance:  What is it?

The Non-admission clause is a statement by your former employer that, even though they are paying you a severance, they are not admitting to anything.  In addition to non-admission, the company usually also expressly denies having done anything wrong.

Explain my severance: What does it mean?

A non-admission clause is self-explanatory.  The company is not admitting anything (this is what "non-admission" means).  Even though the company is paying a severance, and even if the severance is substantial, there is no admission of any wrongdoing.  These clauses are very common.  In fact, even when there is a lawsuit, settlement agreements typically contain non-admission clauses.

Explain my severance: The Upshot.

It is unclear how much value these clauses add because: (1) severance/settlement agreements typically contain confidentiality clauses which prohibit the employee from disseminating the terms of the agreement, (2) a severance/settlement agreement settles and resolves the dispute between the company and the employee, so even if it is an admission, the employee cannot bring a claim, and (3) even without the non-admission clause, there is usually nothing else contained in a settlement or severance agreement which could constitute an admission.  Nevertheless, companies like these clauses because non-admission clauses preclude the possibility that a confidential settlement agreement will be used against the company in the future.

Sample Non-Admission Clause

If you need help with your severance agreement, please feel free to contact us.  We charge a reasonable flat fee to review your severance agreement and offer same-day service.

Read More:

Explain My Severance - Part 1:  The Release

Explain My Severance - Part 2:  The Neutral Reference

Explain My Severance - Part 3:  Non-Disparagement Clause

Explain My Severance - Part 3: The Non-Disparagement Clause

Explain my severance:  What is it?

The Non-disparagement clause is your promise not to say bad things about the company.  Non-disparagement is part of the consideration that you give the company in exchange for severance.

Explain my severance: What can and can't I do?

While every agreement is different, generally, these agreements prohibit you from saying things that shine a negative light on your company.  This would be things like the company discriminates, cheats, lies or otherwise engages in unethical conduct.  A non-disparagement clause prohibits you from saying bad things about the company and, often, those affiliated with the company (assuming that your disparaging statement(s) about those individuals is related to their association with the company).

Explain my severance: The Upshot.

The non-disparagement is scary, but rarely enforced, even when violated.  A non-disparagement clause is rarely enforced for several reasons.

1.  It is pretty unusual for a company to learn about your statements. Especially if you keep your statements to your friends and family.  Social media changes things.  So be conscious of what you post online.

2.  Even if the company does find out, it is not likely that the company will really care.  And by "really care," I mean care enough to sue you over it.  Lawsuits are expensive.  And hard to win.  Often times, the cost of victory exceeds the rewards from victory.

3.  Even if the company does find out, and cares enough to sue you, it is hard for the company to prove damages (i.e. how much the company was harmed by virtue of your conduct).

Finally, it is rare for companies to go to court right away.  More often than not, they send "cease and desist" letters with a stern warning.  While scary and unpleasant, these are a far cry from a lawsuit.

Ultimately, you are giving up the right to say bad things about your former employer by signing a severance.  In exchange for severance (money, reference, benefits, etc.), you promise to go away and not create problems for the company.  One of the ways you can create problems for the company is by disparaging the company.  By signing a release, you give up your right to do so.  Do keep in mind that even if you have the right to say bad things about your company, you may still be liable for defamation.

If you need help with your severance agreement, please feel free to contact us.  We charge a reasonable flat fee to review your severance agreement and offer same-day service.

Sample Non-Disparagement

Read More:

Explain My Severance - Part 1:  The Release

Explain My Severance - Part 2:  The Neutral Reference

Explain My Severance - Part 4: The Non-Admission Clause

Explain My Severance - Part 2: Neutral Reference

Explain my severance:  What is it?

The Neutral Reference is a promise by your employer that, if someone calls in for a reference, the employer will only provide certain information.  Typically, this information is limited to the term of your employment and positions held.  Sometimes, albeit rarely, a neutral reference will also include salary information.

Explain my severance:  Doesn't a neutral reference make me sound bad?

Probably not.  Neutral references are pretty commonplace.  Also, most companies that provide a neutral reference also say that the company policy is to only provide that information and that it never provides additional information.

Explain my severance: But what if someone calls my (jerk) boss?

There are basically two kinds of reference checks that employers do.  The first category is basically employment verification.  This is where your prospective employer makes sure you are not lying on your resume.  This is where the neutral reference kicks in.  The second category is a called a "professional reference," but is really a personal reference.  This is where you have to do your own work.  When you interview for a new job, be prepared to provide professional references.  This is a request for people who will vouch for you as an employee.  This is a personal thing.  Before you head out for interviews, reach out to people with whom you had a good working relationship and ask if they would serve as a reference.  Then that's the name you give.  Sure, a prospective employer might call your boss, but that usually takes a lot of diligence.  Offer up some names of people with whom you have/had a good working relationship for this category of reference.

Explain my severance: But I want a positive reference!

That is tougher.   Especially in situations where the decision to terminate was not amicable.  If you do want a positive reference, the best way to do it is usually an agreed-upon letter that the employer would send to anyone making an inquiry.

Explain my severance: The Upshot.

The neutral reference is pretty common.  Some employees are afraid that it makes them sound bad, but that is not usually the case.  In fact, many companies have a standard policy where it only gives neutral references.  The best thing an employee can do is reach out to people who he/she had a good relationship with and provide those names as professional references.

If you need help with your severance agreement, please feel free to contact us.  We charge a reasonable flat fee to review your severance agreement and offer same-day service.

Sample Neutral Reference (annotated)

Read More:

Explain My Severance - Part 1:  The Release

Explain My Severance - Part 3:  Non-Disparagement Clause

Explain My Severance - Part 4:  The Non-Admission Clause

Explain My Severance - Part 1: The Release

Explain my severance:  What is it?

The Release is your promise not to sue the company. The release is part of the consideration that you give the company in exchange for severance.

Explain my severance: Not to sue for what?

You promise not to sue for pretty much anything that happened before you signed the agreement. A release may only be retrospective (backwards looking), not prospective (you cannot release what has not yet happened). Note, however, that a release covers not only things that you know about, but also things you don't.  A release typically contains a carveout for lawsuits brought by government agencies (like the EEOC), but even when the release has this carve-out, there is usually a clause that says that you cannot recover money based on a government lawsuit.

Explain my severance: Who?

You agree to never sue pretty much anyone ever affiliated with the company. Releases tend to contain broad definitions of the “employer” and/or the “company.”  Also, releases are typically unilateral (you promise not to sue the company, but the company does not promise not to sue you).  Some employees get hung up on this, but, practically speaking, the employee rarely needs a release.

Explain my severance: The Upshot.

The release is typically the most intimidating section of a severance agreement. This is probably because the release is usually the wordiest section of a severance agreement and contains a long list of laws, rules, government agencies, etc. The main thing to take away from your release is that – with very limited exceptions – you cannot sue your employer for anything that happened before you sign the release.

That, really, is the nature of the deal made in signing a severance agreement.  In exchange for severance (money, reference, benefits, etc.), you promise to go away and not create problems for the company.  One of the ways you can create problems for the company is by suing the company.  By signing a release, you give up your right to do so.

If you need help with your severance agreement, please feel free to contact us.  We charge a reasonable flat fee to review your severance agreement and offer same-day service.

Sample Release (annotated)

Read More:

Explain My Severance - Part 2:  The Neutral Reference

Explain My Severance - Part 3:  Non-Disparagement Clause

Explain My Severance - Part 4:  Non-Admission Clause

 

Frequently Asked Questions About Severance

Here are some frequently asked questions about severance, and the answers to those questions. Q1. Will I be blackballed if I ask for/negotiate my severance?

A. While it is possible, being blackballed simply for seeking to improve your situation is not plausible. In all of my years of practice, I have never seen it happen. Think about your field, chances are you do not know anyone who has been blackballed. It does not happen very often. On the flipside, severance negotiations happen all the time. The whole point of a severance agreement is for both sides (the employer and the employee) to move on amicably. If you approach severance negotiations in good faith and without resorting to threats, bombast or nonsense, there should be no ill will created by virtue of negotiating.

Q2. If I try to negotiate my severance, will my employer take back the original offer?

A. This is similar to the answer above. It is possible but not plausible. Your employer made a severance offer in exchange for something (typically a promise not to sue the employer), if they take that back, they are basically forcing your hand. If the offer was made in good faith, it will almost certainly not be retracted simply because you asked for more.

Q3. Am I entitled to benefits with my severance?

A. It depends on the agreement. Depending on how your severance is structured, you may be entitled to continued benefits. This is why it is critical for all employees entering into severance negotiations to prioritize what they hope to achieve.  Continued benefits are more valuable to some employees than others.

Q4. How will my severance agreement be taxed?

A. Only two things in life are certain, and one of them is taxes. Regardless of when severance is paid, or what it is called, the IRS treats severance like any other form of wages and taxes it as such. Thus, severance payments are subject to withholding and employment taxes.

Q5. How much severance should I expect?

A. Unless you have a contract that provides for severance, you have no entitlement to severance. However, you can do two common sense things to educate yourself about what to expect. First, there may be a company policy about severance – take a look at your employee handbook, offer letter, etc. Second, you can ask around – although severance agreements are typically confidential, you might still be able to find out what other employees received. Be careful with the second category of information, though. Not all severances are created equal. The most important, factor in calculating your expected severance is your leverage. For more information on sources of leverage in severance negotiations, click here.