Employment Law Blog

10 Severance Pay Negotiation Tips

If you are evaluating a severance agreement, you should consider speaking to one of our severance lawyers.  The video below provides some insight into the key terms in a severance package.  We offer a severance agreement review and strategy session for $500. Self help guide to negotiating your own severance package. No time to watch a video? You can also read the ten tips below: Delay separation date Negotiate payment terms Collect unpaid expenses Ask for more money Extend health benefits Avoid obligations to pay back employer Avoid obligations to seek new employment Ask for no contest to unemployment claims Ask for a job reference Eliminate non-compete clause

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Employment Law Blog

Six Key Points to Consider when Reviewing a Severance Agreement

These tips may help you evaluate your severance package.   Each case is different so mileage may vary.   It’s a great idea to consult with an experienced New York severance lawyer. 1. What is the severance pay schedule? Many companies will propose a payout in 30 or 45 days after execution of the severance agreement. There is no reason to wait that long and companies will often shorten the payout date to 10 or 15 days upon request. Also, companies often propose a payout over time that basically keeps you on the payroll for a period of time. A lump sum payment is preferable because you get all of the money immediately. Pay outs over time can be disrupted if something comes up – avoid these potential issues with an early lump sum payment. 2. Are outplacement services offered? If so, determine if you need those services. Most people do not want them anymore. If you don’t need those services, ask to have the cash equivalent. 3. Are the severance payments subject to a mitigation offset? For example, if you get a new job within a certain time frame, are you required to pay back an amount or have the payments reduced? Obviously you want to avoid any offsets if you find a new job. If an offset clause is included in your agreement, ask to have it removed. Companies usually agree to do this. The point of a severance package is to end the relationship so why create new ties. Here is a clause that our New York severance lawyers use to cover mitigation and offsets: “The Executive is under no obligation to seek other employment and there shall be no offset against any amounts due to him on account of any remuneration or benefits provided by any subsequent employment he may obtain.” 4. Is there any money owed to you that is independent of the severance package? For example, are expense reimbursements owed or a pending bonus? These payments should be recognized in the agreement. If you know that certain expenses are due, run a report and show it to your employer so the amount owing is known and if any questions arise, try to solve them immediately. Also, if an accrued bonus is due, try to get the bonus paid. The bonus is not part of the severance if it has already been earned. Companies often try to exclude bonuses. Also, be sure to include a clause that covers any outstanding business expenses.  Here is a clause that covers un-reimbursed business expenses: “Within 15 days of the Separation Date, the Company shall pay to the Executive any expense reimbursements due to the Executive as of the Separation Date pursuant to the applicable plan, program or practice of the Company.” 5. Benefit Continuation. If the company has offered to continue your health insurance, will this be accomplished by continuing the existing insurance plan or by COBRA reimbursement? This should be set forth clearly in the agreement. If the company has not offered to extend benefits, you should ask them to do so. Ask to have the benefit continuation mirror the severance period (if the severance offer is 4 months ask for 4 months of continuing health insurance). 6. Job Reference. What type of reference will the company provide to you? If they will agree to a letter of reference, have the letter prepared and attach it to the agreement. Or if a letter cannot or will not be prepared, set out the terms of the reference in the agreement as in this sample. “The Company agrees to supply a neutral reference letter that includes the Executive’s title, dates of employment, salary and the reason for separation as resignation.”  However, many companies today are reluctant to provide reference letters or anything more than a neutral job reference. For more on this topic, see the Forbes article on How to Get the Best Severance Deal.

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Employment Law Blog

New York Severance Agreements

As a general rule, employment relationships in New York are at-will. Typically, that means you can be terminated for any reason (or even no reason), so long as your employer is not basing the decision on a discriminatory or retaliatory motive. Despite this general rule, many companies offer terminated executives New York  severance agreements to ease the transition for both parties. These payments are almost universally accompanied by extensive written agreements setting forth certain obligations and waiving certain rights. It is essential that executives understand what these agreements entail and how they can be improved.  If you need assistance with your agreement, contact our New York severance lawyers. Understanding New York Severance Agreements As stated above, employees generally have no legal entitlement to New York severance agreements. However, although there are no general legal rules, there are circumstances under which employers may be required to pay severance. In the first place, if you have signed an employment agreement—either at the outset of or at some stage during your employment—it may set an entitlement to severance.  In some cases, this payment is clearly defined, in others, the entitlement can is contingent on certain factors such as the length of employment or the circumstances surrounding the termination.  It is important to consult a lawyer to determine exactly what your employment agreement may entitle you to upon termination. Even if you don’t have an employment agreement, you may be entitled to a New York severance agreement to the extent your employer maintains clear policies of making payments on termination. Under many circumstances, such policies create a quasi or implied contractual right to New York severance agreements. Typically, under either an employment agreement or under an employer policy, an employee is only entitled to severance if they have been terminated. In other words, severance is rarely paid out after a resignation. Moreover, employers often do not have to pay severance, even if there is an agreement or policy, if an employee has been terminated for cause. The term cause is not precisely defined, but usually includes criminal convictions, gross negligence, or damaging the reputation of the Company. Again, legal advice is often essential in deciding whether an employer’s “cause” determination is accurate. How to Improve New York Severance Agreements? Once an employer has made an offer of severance, the natural question is whether it can be improved. There are several different strategies an executive should consider in approaching such a negotiation, either on behalf of herself or through an attorney. This will be a highly fact-specific judgment based on, among other factors, the circumstances of termination, the length of tenure, and potential legal claims. The most straightforward way to improve a New York severance agreement is to threaten potential litigation. Almost without exception, a severance agreement will include a waiver of the executive’s right to sue. Therefore, to the extent an executive has a viable legal claim against the employer, it is possible to argue that the amount of severance is not enough to compensate for the loss of that claim. However, because employment relationships are generally at-will, under many—if not most—circumstances, a terminated employee will not have a potential legal claim to bring. Threatening a former employer with frivolous litigation is a tactic that is very likely to backfire, as the threat is not only likely to be seen as aggressive, but also empty. Under such circumstances, it is generally better to consider a more conciliatory approach. The request for an increase in severance can instead be requested based on the length of service, the value the employee added to the organization, and the difficulties that may be associated with making a transition. Such arguments may not always work, but absent a compelling legal claim, they are more likely to be successful than threats. Finally, an executive should consider whether either the New York severance agreement or earlier employment agreements have restrictive covenants, such as covenants not to compete or not to solicit employees or clients. These clauses may be unenforceable if an executive has been terminated without cause, unless the employer offers some severance payment as consideration. To the extent the employer values these covenants, it may be a potential basis to increase the offer. How Else Can New York Severance Agreements Be Improved? There are many ways New York severance agreements can be improved beyond the bottom-line dollar value of the package. Each agreement is different, and it is therefore important to consult an employment attorney to get specific advice. Such potential areas for improvement include neutral employment references, agreements not to contest unemployment benefits, acceleration of unvested stock options, and outplacement services. Including such provisions may make the decision to accept a severance agreement easier even if the amount is not increased. If you have a question about New York severance agreements, contact us to arrange a consultation.

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Employment Law Blog

10 Things Companies Want in Their Severance Agreements

The list below was taken from the Ohio Employers Law Blog written by Jon Hymen. The Ohio Employers Law Blog is written for companies and the ten items listed below are points that companies often include in their severance agreements. If you, as an employee, are provided with a severance agreement, you will probably see similar terms in your severance agreement. The ten points listed below might be useful to know about so you can understand why those terms are present. After some of the points listed below, I have added points from the employee’s perspective in bold. 1. Consideration: A statement that the consideration provided to the employee is more than that to which the employee is otherwise entitled to employment by way of employment. Otherwise, the release and waiver could fail for the employee not receiving anything of value in exchange. Consideration is the legal term for an exchange of value. A contract is not enforceable unless there is a tangible exchange of value. In a severance agreement, the exchange of value is usually an extra payment to the departing executive in exchange for a waiver of the executive’s right to sue the employer. It is important that you understand this part of the severance agreement. You should not sign a severance agreement unless you understand exactly what you are getting and what you are giving up. 2. Confidentiality: A covenant as to the confidentiality of the agreement. You do not want other employees learning the terms of the separation, or that agreement was even reached. Otherwise, it could open the floodgates to other employees seeking separation packages. As an executive who is leaving the company, you may also be interested in keeping the terms of your departure confidential. If so, you should ask your employer to make the confidentiality agreement mutual so it protects you as well. 3. Secrets: A covenant as to the confidentiality of employer’s confidential and proprietary information. 4. Return of Property: A covenant that all corporate property has been returned, or will be returned by a date certain. In some cases, executives are escorted out of the building right after they learn of the termination and they never get the chance to remove their personal property from their offices. If this happens to you, be sure to include a clause in your severance agreement that requires the return of your personal property. It is best if you can list the items that you need to have returned. 5. Transition: A promise to reasonably cooperate with the employer as to the transition of job duties and responsibilities. If the company is seeking your cooperation in transitioning your job to another employee, then you may also ask the company for assistance as you try to find alternate employment. As we all know, it is far easier to find a job when you have one and therefore it may help if you remain with the company in some limited capacity during your job search and retain your company email and a company phone number. It may serve everyone’s interest if you keep your company email and phone number for a few months so you can help the company transition your role and so that you can look for another job. 6. No-rehire: A promise that the employee will not apply for any positions in the future, and that the company is not obligated to consider him or her for future employment. Because there is some risk that a clause such as this could be viewed as retaliatory, indemnification language is not a bad idea. If you work for a large organization such as General Electric, you may not want to sign a severance agreement that contains a no-rehire clause because they own so many other companies and this could bar future employment with any of them. We have had many clients run into trouble with these clauses as they try to obtain alternate employment. Also, I have found that many companies are willing to remove this clause upon request. 7. No Liability: A statement that the agreement is not an admission of liability. 8. Governing law, Jurisdiction, and Venue: An agreement as to the law that will govern the agreement, and the jurisdiction and venue in which one must file any lawsuit regarding a breach of the agreement. 9. Entire Agreement: An integration clause, stating that the written agreement is the parties’ entire agreement, that no other written or oral agreements exist, and that the parties may only amend the agreement in writing signed by all. 10. Voluntariness: An acknowledgement that the employee read and understands the agreement, and had sufficient time and an opportunity to consult with his or her own legal advisor prior to signing the agreement.

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Employment Law Blog

What Is In A New York Severance Package?

We get a lot of questions about severance packages. People want to know what is in one and how much money they should contain. New York severance packages vary from company to company and there is no set formula to determine their value. Most severance packages in NY, however, usually contain some or all of the following: 1. Severance Pay Severance pay is an amount that the company has decided to pay a departing employee. I can be paid in a lump sum or paid out over time. Some companies use rough formulas to determine severance pay and they range from one weeks pay for each year of employment to a months pay for each year of service or more. Or the amount may not be linked to the length of employment. Typically higher ranking company officers receive more money than lower ranking employees. Some top level executives even have their severance pay determined in advance in their employment agreements. There is no legal formula that must be followed and there is no rule requiring the payment of any severance. 2. Separation Agreement This is a contract that sets out the terms of an employee’s separation from the company. It will typically explain the amount of severance pay, the end date of employment and any obligations that the employee owes to the company such as a promise not to compete or steal clients or customers for a set time. The agreement will usually contain a waiver of any rights including the ability to file a law suit against the company for anything. Employees, of course, are not required to agree to any of these terms but the employee will usually not receive their severance pay unless they sign the agreement. 3. Outplacement Services Many companies provide outplacement services as part of a severance package. I have never seen much value in these services and usually ask companies to pay our clients more money in lieu of these services. Some employees, however, find that these services are helpful. 4. Health Insurance Health benefits usually end on an employee’s last day of employment. Some companies will provide departing employees with a period of paid health insurance coverage as part of severance package. Most employers are required under COBRA to provide employees with the option of paying for their own health insurance at the company rate for 18 months. COBRA notices are not usually part of a severance package. 5. Vacation Pay Depending on a companies policy, an employee may receive a check for any unused vacation pay and floating holidays. 6. Stock Options or Company Equity A severance package will usually explain the value and payment terms of any equity interest owned by the employee.

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Employment Law Blog

Severance Package Values in New York

Severance package values tend to track the health of the economy. During good times, companies typically offer more generous severance pay, but values drop during downturns.   When people need help the most, companies offer less. This is because companies themselves are often struggling to survive. So what should employees do to protect themselves? First, smart employees save money to create their own cash reserves. You cannot rely on your employer to help you, so help yourself by creating your own severance package with a big savings account. Instead of buying new cars or widescreen televisions, save some money. Second, be proactive with your career. If you sense that your job is in jeopardy, don’t wait to get fired – instead start an immediate and aggressive job search and find alternate employment. You never want to become unemployed. Today many companies will not even consider an applicant who is unemployed. Being unemployed today must be avoided at all costs – it can cause financial ruin. It is much easier to find a job while you still have one, so you know what to do. In certain cases, employees can negotiate substantial increases to their severance packages. These situations are generally limited to cases involving illegal conduct by the employer such as discrimination, sexual harassment, overtime pay violations and the like. For example, in a recent case we handled, our client was fired at the age of 64 after over 20 years of employment with the company and replaced by a substantially younger person. In that case, our client had a potential age discrimination case and we used this as leverage to negotiate a much better severance package. In another case, our client was fired soon after she was diagnosed with a serious disease and we used the threat of a disability discrimination case to enhance her severance pay offer. Most firings, however, are not illegal. This is because most everyone is an “at-will” employee who can be fired at any time for any reason or no reason at all. In these cases, employees have a tough time negotiating better deals because they have no leverage. So people today should not count on getting a fat severance package to get them through a period of unemployment. During these days of high unemployment, smart employees save money and take control of their careers. The best way to handle a severance package today is to avoid getting one by leaving an unstable job for a better one before you get fired. Please feel free to contact our firm if you have a question. We have been helping employees for over 20 years.

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Employment Law Blog

Severance Agreement Oppression

Regulators are getting stricter about severance agreements.  Read on to learn about how some severance agreements were found to be TOO strict and how to protect yourself when signing one.  There are certain claims that you cannot waive in your severance agreement.  For example, you cannot waive your EEOC (Equal Employment Opportunity Commission) claims.  But your employer can make you sign away your right to recover monetary damages for any EEOC claims. Don’t let yourself suffer from severance agreement oppression. If the severance agreement has an employer non-disparagement clause, there must be language in the agreement to allow former employees to give truthful information to the EEOC and that allows the employee to testify about their employer if subpoenaed. You cannot waive your FLSA (Fair Labor Standards Act) claims.  But your employer can make you sign a statement acknowledging that you have been properly paid. You can waive your claims under the ADEA (Age Discrimination in Employment Act) in a severance agreement. In order for the ADEA waiver to be valid, the employer must be sure these seven factors are met: The severance agreement must reference the ADEA by its full name. The employee must be provided at least 21 days to sign the severance agreement. After signing the agreement, the employee must be provided at least 7 days to change his or her mind. The employee must be advised to consult an attorney before signing the agreement. If the employee was terminated as part of a group, he or she must be given written notice. Employees terminated as part of a group have at least 45 days to considering signing the agreement. Employees terminated as part of a group have a right to see a written list of the group of workers from which the employer chose the workers to be laid off. The list must state who was laid off, who was not and the age and title of every employee in the group. Integration and Severability A severance agreement should contain an integration clause.  An integration clause states that the severance agreement is the one true agreement – that there are no side agreements, whether oral or written.  The integration clause may include a carve out for important side agreements, such as an agreement about the employee’s pension. A severance agreement should also contain a severability clause. A severability clause states that if one portion of the severance agreement is deemed to be invalid, the rest of the agreement still stands. Give us a call if you have any questions about your severance agreement.  We provide a severance agreement review for $500.  One our employment lawyers will review your agreement and meet with you for 20 minutes in person or by phone to over the agreement.  See here for more information. Don’t let severance agreement oppression get you down.

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Employment Law Blog

Severance Packages – Key Points for Every Agreement

A severance package is designed to ease your transition out of the company. Your employer wants to make sure you leave quietly and you want to obtain a cushion to hold yourself over until you find a new job. The points below are important to anyone trying to evaluate a severance offer.  If you need assistance, contact our lawyers today. 1. Understand the Quid Pro Quo of the Severance Package The quid pro quo of a contract is the heart of the deal – the exchange of value. In reviewing your severance package, you need to understand what you are getting and what you are giving up. In most severance packages, you will be receiving a payment of money, possibly some health care coverage, stock options, and other things of value in exchange for your promise to leave the company and waive your right to sue them for anything or say anything bad about them. That is usually the quid pro quo of a severance package. Make sure you understand exactly what you are getting and what you are giving up. 2. The Money Most every severance package contains a promise to pay money. Typically, the money is paid out as salary over a period of time. For example, your severance package might say that you will receive your salary for three months after your last day in the office. The money component of a severance package is almost always discussed in terms or weeks or months of a person’s salary. Be sure to check your agreement so you understand how much money is being paid to you. Remember, you can always ask for more money. If your severance package states that you will receive three additional months of salary after you leave, you can always ask them to increase the offer from three months to six months. You don’t need a reason for asking for more. But if the company asks why you want more money, you can say that you need more because you expect that it will take you more time to find a job. 3. Health Benefits in a Severance Package Your employer will be required to offer you COBRA benefits. COBRA refers to a federal law (Consolidated Omnibus Budget Reconciliation Act of 1985) that requires companies to offer health insurance to terminated employees for 18 months at the corporate rate. For example, if you currently receive health benefits that cost $500 a month through your employer, your company is required under COBRA to offer this same health insurance policy to you at the same price of $500 a month for 18 months. Many severance packages include an offer to make your COBRA payments for a period of time or simply continue your existing health benefits for a period of time and defer the start of the COBRA period. Check your severance package to see if your company has offered to either extend your health benefits or make any of your COBRA payments. Remember that you can ask your employer to help make these payments for you as part of the severance package. 4. Unemployment Benefits If you are about to lose your job, you are probably very interested in obtaining unemployment benefits. Typically, a person is only entitled to unemployment benefits if they are laid off due to a lack of work. A person who is terminated for cause or quits is not entitled to benefits. It is not uncommon for companies to challenge a former employee’s request for unemployment benefits on the ground that the employee was fired for cause or poor performance. You can make sure this does not happen to you by including the right language in your severance package. Obtain an agreement that your employer will not contest your right to unemployment benefits. In order to do this, add a sentence to your agreement with language similar to this: “It is agreed that [You] had been laid off for lack of work (or restructuring or downsizing etc…) and that [You] is entitled to receive unemployment benefits and X Company agrees that it will not contest any claim for unemployment benefits requested by [You]. 5. Exercise Your Vested Stock Options If you were provided stock options, make sure you have an opportunity to exercise them. Typically a departing employee will have 90 days to exercise vested stock options before they expire. But make sure this is clearly stated in your severance package and you can ask to extend the 90-day period. 6. Accelerate the Vesting Schedule for Unvested Options or Equity Grants Executive compensation often comes in the form of unvested stock or options. For example, a company may offer an executive 300 shares of company stock and the shares will vest over three years. If you have unvested equity or options, you can ask your company accelerate the vesting date so they vest before you leave the company. 7. Convert Outplace Services into Cash Companies often offer outplace services to departing employees. If you don’t feel that the outplacement service will provide a benefit, then ask your company to provide you with the cash value of these services. 8. Vacation Pay Some companies allow an employee’s unused vacation time to accrue over time. Check your company policy manual or ask a human resources representative about this and if your have accrued vacation time, ask to have it paid in cash or ask to stay on the company payroll until the vacation time is used up. 9. Determine Why You Were Let Go You may have leverage to negotiate a much better severance package if your employment was terminated illegally. Your termination may be illegal if you were let go for any of the following reasons: age if you are over 40, gender, race, religion, national origin, sexual orientation, disability or serious illness, sick family members, pregnancy, jury service, or for complaining about sex harassment, employment discrimination or failure to pay overtime. If any of these factors are at play, you may have grounds to substantially increase your severance […]

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Employment Law Blog

How to Fetch a Better Severance Package

Severance Package Negotiation Tips My dog Miller loves to play fetch on the beach.   It struck me that playing fetch has some similarities to a severance package negotiation.   In this video, you can see Miller playing fetch on the beach and I explain how a severance pay negotiation works.  You can read more about severance negotiation tactics below the video. How to Get a Better Severance Package In order to improve your severance package, you need to understand what your company wants from you.  In a severance situation, your company wants you to cooperate and leave quietly.  A severance package is simply an offer to purchase your cooperation.   In most cases, it pays to cooperate and obtain the severance package that is offered.  But if you suspect that your rights have been violated at work, you might be able to negotiate an enhanced package. Don’t Cooperate if You Have a Potential Employment Claim You can negotiate a better severance package if you have a viable employment claim.  If your employer has violated your rights, you can use that to negotiate a better severance package.  We have increased severance pay offers many times over by threatening employment litigation.  But this only works if the claim is viable. Most employment claims today involve some kind of employment discrimination.  If you were fired, demoted or otherwise denied employment benefits due to a disability, pregnancy, your sexual orientation, gender, race, religion or national origin, you might have a claim.  Other common workplace wrongs involve firing an employee for taking or requesting family or medical leave, reporting employment discrimination or sexual harassment or complaining about wage violations such as the denial of overtime pay.  If you suspect any kind of foul play, it pays to contact our New York severance lawyers Get a Free Consultation Many employment law firms today offer free telephone consultations.  At our firm, you can call us and tell us about your situation and we will let you know if we think you have a claim.   There is no charge.   Call us at 212-571-2000 or Contact Us online.

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