Share on Facebook
Share on Twitter
Share on LinkedIn
By Jonathan Bechtel
Founding Partner

Severance packages are beneficial for the employee and the employer alike. For the employee, severance can mitigate the financial blow of a job loss and aid in the transition to a new position. Meanwhile, the employer can offer the severance package in exchange for the employee releasing legal claims he or she might have had against the company. Severance is typically the product of careful negotiation, and an experienced employment lawyer can assist either party to the agreement. Stanfield Bechtel Law has experience drafting and negotiating severance packages for both employees and employers.

For the employee

If you’re an employee, keep in mind these points when discussing severance with your employer:

Negotiate severance before accepting the job

If a company has expressed interest in you, find out what you can about its severance policy. Employers are not legally required to offer their employees severance. But if the employer offers it you should learn what you can and negotiate it before accepting a job offer. It is much easier to negotiate favorable terms when a company likes and wants you to work for them.

Use any leverage to your advantage

Employees, or potential employees, with the most leverage tend to negotiate the best severance packages. There are many avenues of leverage that could work in your favor. For instance, did the employer approach you about working with them? Is the job itself risky, or in an unstable industry that is subject to volatility? Let the company know that you are taking a chance by accepting the job and that you want some security in the form of severance.

Include pay and benefits

Be sure to negotiate both severance pay and benefits like health insurance. For pay, a good rule of thumb is to request at least one to two weeks of severance for every year that you worked. If the job loss creates a substantial hardship, consider requesting four weeks of severance per year. Executives may be able to negotiate higher amounts.

As for benefits, you should consider negotiating the following:

Insurance: Ask for extensions of health, life, and disability insurance coverage. For health, another option is to ask for COBRA for up to 18 months, possibly with premium waivers. You can also request that the employer cover health insurance premiums until you find a new job.

Retirement and stocks: Understand the company policies regarding retirement plans, pensions, and stock options. Find out how state and employer rules will affect these for you.

Outplacement: Seek outplacement services that can help you secure new employment. Be sure the outplacement service meets your specific needs, like retraining, office support, or counseling.

Departure and recommendation: Work with your employer to determine a mutually agreeable timeline of your departure. Draft a recommendation letter for your boss or manager to review and sign.

Company perks: Negotiate your right to keep company equipment, like a laptop, after your departure. Discuss possible ways to keep other, pricier benefits like a company car. Be sure any agreements are reduced to writing.

For the employer

Employers can use severage agreements to their advantage as well, and should remember these principles when negotiating them:

A clean break

Arguably, the primary objective in agreeing to severance is to effectuate a clean break with the departing employee. This means that in exchange for severance, you will want the employee to release any sort of employment law and other legal claims he or she might have had. The agreement should be carefully written to ensure this outcome and protect your interests.

Non-competes

You may be able to include a non-compete agreement as a condition for the employee accepting the severance package. This is especially useful if the departing employee is a high-level executive who could start a competing business. Connecticut law imposes limits on the terms of these agreements, which must in general be reasonable.

Outplacement services are especially helpful

One of the key concerns that employees have when they lose their jobs is finding the next one. If the employee can find new employment relatively easily, he or she may be less inclined to pursue legal action against you for alleged grievances. Outplacement services, mentioned above, are especially popular with both employees and employers. They demonstrate good faith and concern for the departing employee’s well-being and ability to provide for their family.

Retain Our Experienced Employment Law Team For Severance Agreement Matters

For negotiations, drafting, and review of severance agreements, it’s always a good idea to hire knowledgeable legal counsel. Whether you’re the employee or employer, we can help negotiate the best possible deal that protects your personal and financial interests. Call Stanfield Bechtel Law today to learn more.

About the Author
Jonathan believes the client should always come first, and aims to deliver a positive experience to exceed client expectations.