Severance Packages

Published on November 9, 2014 by in Blog, Featured

Anthony J. VignierWhat can you do when a company has announced layoffs, but asks you to work for several more months in order to receive a severance package? I plan to stay and make arrangements for new work based on the termination date. I fully understand I can be let go at any time for cause, but absent that, can I protect myself from an earlier-than-anticipated termination?

I am sorry to hear about your situation which has become all to common to many people. All severance packages tend to be unique not only to a company, but also unique to each individual in that company for whom a severance package is offered. A severance package is an agreement or contract between an employer and an employee. A severance package is often granted to employees upon a termination of employment based on the amount of time that the employee has worked for the company, and it can include benefits for unused vacation time etc. Because an agreement is a contract it can often be open to negotiation even when one side says that it is not. Before signing or agreeing to anything you should take time to consider your options. Policies for severance packages are often found in a company’s employee handbook. That’s where you should look first. Many handbooks have written severance plans that don’t require you to sign anything including a release or non-competition agreement. A severance package may be giving you something you are already entitled to in which case why sign anything. After looking through your handbook, read the severance contract carefully.

After reviewing the employee handbook and the severance contract, go to an attorney, preferably one the focuses on employment law. Having a professional advise you on your specific situation will be worth the consultation fee. Sometimes severance agreements may stop you from bringing future lawsuits against the employer for claims such as employment discrimination, sexual harassment and payments owed such as bonuses so this something also to consider. Other points to consider, aside from payments and the termination date are taxation issues, payment for unused vacation, personal and sick time, agreed language for reference purposes, health insurance benefits, scope of non-competition, non-solicitation and non-disclosure obligations, and consideration of unemployment insurance benefits. Severance contracts can stipulate that the employee will not sue the employer for wrongful termination or attempt to collect unemployment insurance with the consequence that if the employee does so, then the employee must return the severance money – so watch out for this. Depending on what the lawyer recommends for you, you then have to decide whether to have the lawyer or you yourself negotiate the package. This can be a difficult decision and it should be based on what you are comfortable with and what’s at stake. Many people find it difficult to advocate for themselves so having someone speak for you can be worth it. On the other hand keep in mind that if a lawyer writes a letter or contacts the company to negotiate the package, management is likely to forward the matter to corporate counsel who can be more difficult to deal with and your legal fees can mount.

In your case, you want more certainty with regard to when your employment will actually cease. The fixed date of termination that was given to you is meaningless because of the language that the termination date can be “at some other date to be determined by the company.” You should consult with a lawyer and then, unless other options exist in your case, either you or your attorney should try to negotiate a solid, fixed date with no wiggle room so that you can plan your job search and know up to what date you will get paid. Hand in hand with a fixed date you can suggest that language be inserted providing you and your employer the option to negotiate additional time when that termination date arises. This will allow you to make plans and can also be helpful to the company as well since in many cases companies underestimate the time that they may need an employee to stay on.

One more thing when a new position does arise at another company, as uncomfortable as it may be, that can be the perfect time to negotiate a severance package with that company. Good luck!


Anthony J. Vignier, JD, CFP is an attorney and Certified Financial Planner in Kearny, New Jersey. He helps his clients with legal matters, asset and income protection strategies as well as investment guidance. Please call Anthony at (800) 707-5252 or send him a message through our contact form.


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