Hopefully, you will never lose a job unless you choose to seek employment elsewhere. However, it is not always up to you. You may be fired or laid off for a variety of reasons. Should this happen, your employer might request that you sign a severance agreement.
Knowing what steps to take in these circumstances is understandably difficult. After all, you might not have expected to lose your job. The shock of being let go can be jolting, and knowing if you should sign a severance agreement in this situation is not always easy.
Severance Agreements FAQs
What is a severance package? How does severance work?
If you decide to leave a job, you are signaling to your employer that you have the financial means (or at least believe you do) necessary to sustain yourself until you accept work elsewhere. You are the one responsible for ensuring your financial wellness if you decide to stop working for a particular company. Therefore, it is not typical for an employer to provide any financial assistance in these circumstances (although there are instances when employers offer severance packages to employees who retire or resign under certain conditions).
That is not the case if your employer lets you go. Companies often provide severance packages consisting of pay and benefits that remain in place for a certain period after you have lost your job. Severance packages may also include unused paid time-off and any overtime hours you have worked, along with unpaid bonuses. Because you may not have expected to be let go, you might not have enough money saved to provide for yourself and your loved ones until you find employment elsewhere. A severance package helps during this transition period.
It is worth noting that severance benefits and pay are not always guaranteed. If a company is laying off employees, they do not necessarily need to provide severance packages. However, pursuant to the W.A.R.N. Act, subject to many conditions in the law, generally if a company has over 100 employees and is laying off a sufficient number of them (typically due to the company closing or major departments closing), the organization is required to provide employees with 60 days notice before they are laid off. Many employers will make a “severance” payment instead of having employees work for the 60 day notice period. The terms of the severance payment are important here as the payment generally cannot be conditioned upon a release. If your employer fails to provide this notice, you should contact an employment law attorney to pursue the pay and benefits to which you are entitled. Similarly, you should contact an employment attorney to review the terms of any severance payment offered to you under these circumstances.
Do you get severance if you are fired?
There is a difference between being laid off and being fired. When an employee is laid off, it typically is not because of their performance. Their employer may have moved or closed. Their department might be downsizing. Perhaps the business lost several clients, and there is no longer sufficient work for an employee. These are all common reasons to be laid off.
Being fired, on the other hand, often involves losing your job because you did not perform well, violated company policies, or were otherwise at fault in some capacity. Therefore, you might naturally wonder whether you are entitled to severance if you are fired. Should the company be responsible for your financial well-being if you lost a job because you were not a strong or trustworthy employee?
Again, you may not even be entitled to severance if you are laid off, assuming your employer provides the required notice. That means you certainly are not immediately entitled to a severance package if you are fired. However, many employers do choose to offer severance packages, even when firing employees for poor performance or misconduct, to minimize the risk that you may bring a lawsuit against them. An employer may want to take the safe route and offer severance, usually conditioned upon signing a general release of all claims against them. Just remember, there is no guarantee they will make this offer, particularly when the employer does not believe they are at significant risk of a lawsuit.
When Not to Sign a Severance Agreement
It may seem as though you should always agree to sign a severance agreement. If you don’t sign, are you not depriving yourself of pay and benefits to which you are entitled?
There are instances when you may be better off not signing your severance agreement. Sometimes the benefits offered in a severance package are not ideal. You might believe you can negotiate a better package. Additionally, severance agreements often serve to protect your employer, as well. For instance, a severance agreement might require you to agree not to sue your employer in the future. If you believe you have been wrongfully terminated, and do plan to sue, you should not sign the severance agreement.
Severance agreements sometimes contain non-compete agreements as well. These agreements might prevent you from finding work in your field. If you sign the severance agreement, you could struggle to find new employment until the terms of the non-compete agreement expire.
Agreeing to a severance package might also impact your eligibility for unemployment benefits, and your pension rights. You may be better off financially in the long run if you do not sign.
There are also situations where the severance agreement is unfairly one-sided and does not contain specific provisions that would protect you. For example, a strong severance package will generally include a non-disparagement provision, which requires you to not publicly “bad-mouth” your employer in a way that would negatively affect their business. You would want to negotiate terms which protect you as well, either in the form of a mutual non disparagement clause, or a positive reference letter which will assist you as you seek employment in the future.
All of this can seem complicated. That is why an employment law attorney should always review your severance agreement (and any other documents presented to you with that agreement) before you sign it. An employment law attorney will confirm the terms are fair or let you know what steps you can take next if the package is not sufficient.
Have you recently been offered a severance package? If so, get in touch with the employment law experts at Wenzel Fenton Cabassa, P.A., serving clients throughout Florida.
Please Note: At the time this article was written, the information contained within it was current based on the prevailing law at the time. Laws and precedents are subject to change, so this information may not be up to date. Always speak with a law firm regarding any legal situation to get the most current information available.