During these tough economic times, layoffs have become increasingly frequent. Unfortunately, employees of all experience levels are left with no job and face a bare economy.  At a time like this, most employees may think accepting a severance package is the best choice.  But before signing anything, it is important to understand the basics of the severance package and the potential rights that might be relinquished in the process.

Before you attempt negotiations, you should first understand that there is no statutory minimum amount of time an employee must be given to consider the severance agreement.  A prevalent misconception is that all employees are entitled to 21 days to review a severance package offer.  Unless the package is offered to an employee over the age of forty, however, there is no specific review period defined by law.

Steps to Take Before Accepting, Negotiating, or Rejecting a Severance Package

Before deciding to accept, negotiate, or reject a severance package, it is important to understand completely what is being offered to you, including compensation, benefits, and insurance.  If you are in an industry that provides for deferred stock options or bonuses, it is important to understand whether you would still be entitled to it.  You should gather information concerning your employer’s welfare plans, health plans, vacation and sick leave policies, as well as any structured bonus plans or stock options.  If the severance package is only offering you what you would be entitled to, the agreement may lack adequate consideration.

Consideration, in the context of severance packages, means that an employee must receive something of value in exchange for giving up certain rights.  This “something of value” must be something other than what the employee is already entitled to.  Often, this comes in the form of additional pay or prolonged benefits.

Because the employee is receiving consideration, most severance agreements contain a release of a variety of legal claims against the employer.  This typically involves a release of all claims against the former employer that are based on age, race, national origin, gender, disability, and religion. These are critical rights all employees are granted under the ADEA, Americans with Disabilities Act, Employee Retirement Income Security Act, and Title VII of the Civil Rights Act.

Negotiating a Severance Package

When negotiating, it is important to keep the above facts in mind, but also that most employers are willing to negotiate severance on some level.  While it seems like the package is a “take it or leave it” deal, most employers are open to reasonable requests in negotiation.  There is always a risk that an employer will revoke the offer if any negotiations are attempted, but your chances of negotiating successfully increase if there is a claim that your particular severance package is not fair in light of your industry, your position, or the circumstances of your employment.

Additionally, the negotiations should not focus solely on the dollar amount connected with the severance agreement.  Employers might be willing to extend insurance coverage, disability benefits, or other items in lieu of an increase in dollar amount.

Given the breadth of the claims released and the intricacies of most severance packages, it is extremely important to consult with an attorney before signing. The attorneys at Maya Murphy, P.C., have years of experience in all sectors of employment law.  If you have any questions relating to your severance agreement, please contact Joseph Maya and the other experienced attorneys by phone at (203) 221-3100 or via e-mail at Ask@Mayalaw.com.