I Was Offered a Severance Agreement. Now What?

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If you are given a severance agreement, consult with an attorney

Federal law requires that many employees who are offered severance agreements be advised by their employers to consult with an attorney before signing a severance agreement. If you have a severance agreement, you should consult with a knowledgeable employment-law attorney as soon as possible. Almost all severance agreements have a short time period, usually no more than 21 days, for the employee to accept the agreement. Here are some of the factors to consider in whether to accept a severance agreement.

If you have a severance agreement, you should consult with a knowledgeable employment-law attorney as soon as possible.

A. The value of the certainty of a severance agreement versus the uncertainty of a wrongful-termination suit. This requires an attorney to evaluate the strength of any possible employment-law claims you might have against your former employer. In many cases, the value of a certain amount of guaranteed severance pay is worth more than the uncertain outcome of a wrongful-termination claim that might not resolve for at least a year. Certain types of unfair-employment practices create more fear of litigation for employers than others. Employers are often willing to pay severance in order to avoid the expense and uncertainty of litigation. This fear can give employees some leverage in negotiations, which could lead to an increase in severance pay. However, every situation is different.

If an employee decides to reject severance and pursue a wrongful-discharge claim, a knowledgeable employment-law attorney can advise you on your chances of receiving unemployment benefits. Employers, especially smaller ones, will often fight unemployment claims if there are bad feelings surrounding a termination. If an employee is found to have been fired for misconduct, they are potentially losing many thousands of dollars in unemployment benefits. Before you reject severance, you should know your chances for receiving unemployment benefits.

B. A knowledgeable employment attorney may be able to review the severance agreement and find contract provisions to offer the employer in order to increase the severance pay. The fear of litigation is a stick, but sometimes employees can offer carrots in the form of favorable contract language to increase severance benefits.

C. Severance pay is not the only consideration in a severance agreement. A standard severance agreement often includes a provision that the employee is eligible for COBRA. COBRA requires that the employee pay the entire premium for health insurance. Sometimes employers are willing to pay that COBRA premium for a period of time.

Another possible severance benefit is the guarantee of a positive reference. A severance agreement is a contract releasing any claims – usually with the exception of workers’ compensation (see below) – by the employee against the employer. However, if the employer breaches the contract in regards to a positive reference, that can give the employee a breach-of-contract claim if the severance agreement is drafted properly. Many companies are willing to check out what employers are saying about former employees for a reasonable fee, so employees can enforce contract provisions regarding positive references

D. Workers’ Compensation. The laws regarding settling a workers’ compensation claim are very precise. I have never seen a severance agreement that creates an enforceable release of a workers’ compensation claim. However a savvy employer may be able to release your workers’ compensation claim through a severance agreement under recent changes in Nebraska’s workers’ compensation law. This is why you should consult with a lawyer who is familiar with fair employment and workers’ compensation law. This is especially true if you have an ongoing workers’ compensation claim against your employer.

E. You still might be able to bring a wrongful termination suit even if you signed a severance agreement. The Equal Employment Opportunity Commission has provided guidelines about when a severance agreement is not binding on the employee. If you feel you were railroaded into signing a severance agreement, it still might be worth your time to consult with a knowledgeable employment attorney.