Severance Agreement Negotiations

I have negotiated and/or reviewed over 650 severance agreements over the years – and I frequently have obtained severance for individuals who were not offered any severance by their employer, as well as obtained more severance for individuals than what they initially were offered – I have a strong understanding and successful track record of what are the best approaches to maximize your monetary (salary, bonuses, commissions, benefits) and non-monetary (critical language items) severance recovery.

When an employee’s employment ends the employer often will pay severance to the employee in exchange for a release of potential claims that the employee may bring as well as to buy the now-former employee’s silence from saying negative things about the Employer and Employer’s business in the future. This occurs both in the situation where the employer has delivered a severance agreement to the employee upon termination as well as in the situation where the employer has terminated the employee’s employment but not delivered a severance agreement to the employee.

My job (on your behalf) is to impress upon the Employer the best leveraged reasons (positive arguments and negative arguments) for why you should receive severance/ more severance, toward maximizing the amount of severance that you will receive.

In fact, there are four main scenarios that can result in an employee receiving severance from their employer:

1. the employer delivers a severance agreement to the employee upon termination;
2. the employee delivers a severance agreement to an employee during the employee’s employment, along with a request that the employee accept the severance and voluntarily leave their employment
   • I call this the employer trying to “have their cake and eat it too” approach, and frequently involves a situation where the employer wants the employee to leave their employment but (because the employer is so fearful of litigation) they are not willing to risk terminating the employee first without a signed severance agreement (for fear that the employee will file litigation rather than engage in negotiation and sign a severance agreement);
3. the employer terminates the employee’s employment without delivering a severance agreement to the employee; and
4. the employee (for any one of a number of reasons) wants to quit their employment – employees in this situation should contact me first before giving notice (so that you do not lose valuable leverage that you may otherwise have had towards obtaining severance).

Due to my being an employment attorney, and my extensive experience, I have frequently obtained severance/ additional severance for employees in each of the above scenarios. In this regard also:

• Most attorneys, when they review a severance agreement, they are just looking to see if the contents are fair and just.
• While I of course do this, I also frequently will actively be looking to see if I can obtain more monetary severance (as well as better language terms) for my client. Depending on the circumstances, I sometimes consider such initially-delivered severance agreement to merely be an initial offer by the Employer – to which I would be making a counter-offer.
• And in circumstances where my client has been terminated (or otherwise wants to leave their employment) where no severance has been offered, I will frequently be inquiring into background facts to see if there are potential avenues for my obtaining severance for my client (which severance I consider to be a settlement short of a lawsuit and/or as a monetary exit package in appreciation for my client’s productive employment and valuable achievements for the Employer).
• I attempt to maximize your monetary recovery as well as protect your interests and rights.

For many proactive and valuable suggestions in this regard go to Top Tips for How to Get the Most Severance (that I have written).

Depending on the circumstances, I can make a big positive monetary difference in increasing what you receive, and I can also protect your interests with regard to non-monetary issues (e.g. – reducing/ eliminating restrictive covenants such as non-compete clauses and non-solicitation clauses, limiting non-disparagement clauses to instead be non-defamation clauses in compliance with the NLRA, removing forfeiture clauses and other penalty clauses, and having there be a truly enforceable neutral reference clause, as well as having the Employer agree in writing not to contest you receiving unemployment compensation benefits, etc.).

Just because the employer in writing offers a certain amount of severance, that does not mean that the amount is etched in stone for the employer to unilaterally decide how much you are to receive – you should have a say in this too! I have often successfully negotiated and obtained an increase – by many thousands of dollars – in the amount of severance that my clients are to receive.

Moreover, I have also frequently obtained substantial severance for employees even where the employer has not initially offered the employee any severance – by pointing out certain “realities” (both positive and negative) to the employer.

In the situation where the employer has delivered a severance agreement to the employee, the employee should also realize that such severance agreement was prepared by the employer’s attorney and contains legalese that the employee should have reviewed by an attorney of the employee’s own choosing.

Separate and apart from the above-mentioned issue of the dollar amount of the severance, frequently there is language contained in the proposed severance agreement that would place the employee at a precarious financial situation (due to a breach or even a claimed breach, of the agreement, and otherwise, where the employer has abusively inserted a forfeiture clause, a liquidated damage clause, an overly expansive non-disparagement clause, a non-compete/ non-solicitation clause, and/or a 1-way attorney fee clause), and sometimes there is language missing from the agreement that should properly be in the agreement (e.g. – neutral reference language, no contest unemployment language, etc.). I frequently can speak with the employer/ employer’s attorney to correct the situation and protect my client.

Interplay Between Severance Payments and Unemployment Compensation Benefits

One issue here is whether a Claimant/ former employee can receive unemployment benefits at the same time as receiving severance payments without there being subtractions from such unemployment benefits for the amount of the severance payments – which can make all the difference in what total monies you ultimately can receive.

• In Illinois a Claimant employee can receive unemployment benefits at the same time that the Claimant/ former employee is receiving severance payments, and there generally will be no subtraction for severance payments from the IDES benefits that the Claimant is receiving. The rationale for this is that the severance payments that an employee is receiving is not for work done after the end of the Claimant’s employment.
• By contrast to how Illinois does it – and despite the above-shown rationale – in both Indiana and Wisconsin the state unemployment offices instead will subtract severance payments from any weekly unemployment compensation benefits that a Claimant/ former employee may receive for that week.
• As a result, if your unemployment compensation benefits are coming from Illinois then you are fine, but if such unemployment benefits are coming from Indiana or from Wisconsin – note that the state unemployment office in Wisconsin mainly refers to severance payments somewhat misleadingly as “termination pay” – then if possible it would be best for the Claimant/ former employee if the severance payment(s) were paid earlier in a lump sum rather than spread out over a period of weeks or months.

Certain Employer Deceptive Practices – Don’t Be Tricked

• Some Employers deceptively make announcements to their employees asking for volunteers to be laid-off and receive severance. In such situation, if an employee elects to be laid-off rather than continuing their employment, then the employee likely may not be eligible for unemployment compensation benefits, even if the Employer does not contest their receiving unemployment compensation benefits. The reason for this is that the IDES views this as a situation where the employee could have chosen to continue their employment – with the IDES generally considering this to be a situation where the employee voluntarily quit. Do not fall into this trap.
• Similarly, some Employers hand employees Performance Improvement Plans (PIP’s), say 30, 60, or 90 day PIP’s, and at the same time advise that the employee has the “choice” to either be under the PIP or agree that the employee’s employment would end at the end of the PIP but the employee would not need to work under the PIP or, sometimes, perform any other work, providing the employee signs a document at that time bindingly agreeing that the end of their employment will be at the end of the time the PIP would have ended. Frequently Employers do this in a coercive manner, implicitly advising (verbally) that the PIP will be rough and that there is no way the employee will pass the PIP. In such a situation, if the employee elects to agree to the end of their employment then this likewise is a situation where the IDES may view it as being that the employee could have chosen to continue their employment – even if it was not a real choice – with the IDES generally considering this to be a situation where the employee voluntarily quit.

I have frequently handled these situations, and often have advised and guided my clients on how to achieve the best outcome: with my giving my clients negotiating leverage and frequently obtaining even more severance pay for my clients than has been offered; my clients being found eligible for unemployment compensation benefits; and my obtaining other important monetary and language terms favorable to, and protective of, my clients.

Call me to briefly discuss if it makes sense for you to come in for an appointment to my Chicago loop office to further discuss your employment situation.