It’s not a great feeling, learning that you’ve been laid off or terminated from your job. The past couple of years have caused a wave of different scales of lay-offs – companies large and small. Learn more here.
What is a Severance Package?
A severance package is an agreement that provides you with some form of compensation or benefits when you depart from your current employer.
A severance package may include one or more of the following elements:
- Monetary payments: This is the most common form of severance pay, and it usually depends on the employee’s salary, length of service, and reason for termination. Some employers may offer a lump sum payment, while others may pay the employee over a period of time.
- Vacation or sick pay: Some employers may pay the employee for any unused vacation or sick days that they have accrued. Make sure that you keep a personal track record throughout your time with any employer in case this conversation comes up.
- Stock options: Some employers may allow the employee to exercise or sell their stock options or other equity awards that they have earned.
- Job-search assistance: Some employers, especially right here in Memphis, may provide the employee with career counseling, resume writing, or job placement services to help them find a new job.
- Health insurance: Some employers may continue to pay the employee’s health insurance premiums for a certain period of time, or offer them a subsidy to purchase their own coverage through COBRA.
- Retirement benefits: Some employers may contribute to the employee’s retirement plan or pension fund, or allow them to withdraw their funds without penalty.
Are You Entitled to a Severance Package?
Short answer – no. There is no federal or state law that requires employers to offer severance packages to their employees, unless they have a written contract or a collective bargaining agreement that guarantees it. However, there are some situations where an employer may be obligated to provide severance pay or benefits to their employees:
- The employer has a policy or practice of offering severance packages to employees in similar positions or circumstances, and the employee meets the eligibility criteria. Talk to your Human Resources department about this; it should also be accessible in any onboarding tutorials or available guides for employees.
- The employer has violated the Worker Adjustment and Retraining Notification (WARN) Act, which requires employers with 100 or more employees to give at least 60 days’ notice before closing a plant or conducting a mass layoff that affects 50 or more employees. If the employer fails to comply with the WARN Act, they may have to pay each affected employee up to 60 days’ worth of wages and benefits.
- The employer has discriminated against the employee based on their race, sex, age, disability, religion, national origin, or other protected characteristic, and the employee has a valid claim under federal or state anti-discrimination laws.
- The employer has breached the implied covenant of good faith and fair dealing, which is a legal principle that requires parties to a contract to act honestly and fairly toward each other. If the employer has acted in bad faith, such as by firing the employee for a false or pretextual reason, they may be liable for damages.
How to Negotiate a Severance Package
If you are offered a severance package by your employer, don’t be hasty to sign it right away. Take the well-deserved time to review the terms and conditions of the agreement, and consult with someone like a Crone Law Firm teammate to make sure that you’re making the best decision for you and your loved ones. For now… (insider knowledge) you may be able to negotiate a better deal by following these tips:
- Know your rights: Before you enter into any negotiations, you should know what you are legally entitled to, and what you can reasonably expect from your employer. You should also be aware of any deadlines or limitations that may apply to your situation, such as the statute of limitations for filing a lawsuit, or the expiration date of your stock options.
- Know your value: You should also know how much you are worth to your employer, and how much it would cost them to replace you. You should consider your skills, experience, performance, and contributions to the company, as well as the market demand for your profession. You should also research the average severance pay for your industry and location, and use that as a benchmark for your negotiations.
- Know your goals: You should also know what you want to achieve from your severance package, and what you are willing to compromise on. You should prioritize your needs and preferences, such as money, health insurance, references, or non-compete clauses, and be prepared to make trade-offs if necessary.
- Know your strategy: You should also know how to approach your negotiations, and how to communicate effectively with your employer. They’re humans too, and any decision like this is probably part of a bigger picture. Go in open-minded but prepared. You should be polite, professional, and respectful, but also assertive, confident, and persuasive. You should present your case with facts, evidence, and logic, and avoid emotional or personal attacks. You should also be flexible, creative, and open-minded, and try to find a win-win solution that benefits both parties.
Severance packages are not mandatory, but they can be beneficial for both employers and employees. Employers can avoid potential lawsuits, protect their reputation, and maintain good relations with their former employees. Employees can receive financial and emotional support, and transition smoothly to their next career opportunity. If you are facing a termination or layoff, you should consult with an employment lawyer in Memphis (we happen to know a good one or two), to help you understand your rights and options, and negotiate a fair and reasonable severance package.