Transcript:
00:00:00
So potential clients come to me all the time and ask me, can I get more money when they are presented with a severance agreement?
00:00:10
And candidly, it depends. It depends on the facts of the situation and whether or not you have leverage. And what I mean by leverage is do you have any potential legal claims against the employer that you could say to them, you know, I have these claims against you, and so I’m entitled to more money to be compensated for what these claims are worth that may be different than and more than what they’re offering to pay you in severance.
00:00:33
And typically employers will offer a severance agreement and they’ll include what’s called a release of claims, which means that once you sign that severance agreement, whatever it is they pay you, you are releasing every claim you may have under the sun, whether known or unknown, up to the date you sign that severance agreement. So it’s really important to understand what your rights are.
00:00:55
Now, what I want to talk to you about briefly is specific clauses you would find in a severance agreement that you should be thinking about before you decide whether you’re going to sign one. First of all, you have no legal entitlement to a severance payment. You work at a job and if an employer decides they want to pay you a severance because they’re laying you off or they decide they want to separate you for whatever reason,
00:01:22
Sometimes you’ll see a clause in that severance agreement that says there’s no legal entitlement for the severance payment over what the employee would otherwise receive as an employee for the wages they’ve earned. And employees are not entitled to severance. So what does the severance payment mean? Well, to understand that, it’s based on a contract law concept called consideration.
00:01:45
And what that means is that each side has to give something and get something in order for it to be enforceable. So in this situation, a severance agreement that says you’re getting something you would not otherwise be entitled to, what they’re saying is we’re paying you consideration in order for you to give us a release and various other clauses that you would find in the severance agreement.
00:02:05
And so wages, in contrast, are non-negotiable in terms of a severance agreement. The employer can’t just say, we’re going to pay you the wages we owe you in a severance agreement and call it a day and that’s enough. That’s not consideration because you’re owed that money you’ve already earned. And so severance is different than wages you’ve already earned. And you’re entitled to that without having to negotiate for it.
00:02:29
Next, I see clauses sometimes in severance agreements called no rehire clauses. So that means that you agree that you will never seek to be employed by that employer ever again as in exchange for the severance payment you’re going to get.
00:02:46
Now, the reason why employers insist upon that sometimes is because they have a concern that an employee may leave the company, be paid the severance, and then the employee applies in the future for a job with the company and then sues for retaliation for not getting selected for the job.
00:03:02
And so employers want to close up loose ends and basically separate. And that’s why you have no rehire clauses in agreements. Now, there are other employee promises you’d find in severance agreements. Confidentiality provision about the terms of the severance that’s being offered. A general release of claims, which I’ve already talked about. A non-disparagement provision against the company.
00:03:25
Now, a non-disparagement means you’re not going to talk bad about the company. Usually that’s one-sided. So I have clients sometimes come to me and say, shouldn’t that be mutual? Maybe, but it really depends on whether or not you have leverage, legal claims you can assert. If you don’t, it’s usually one-sided because you’re not paying any consideration. You’re not paying the company anything to get that term. So therefore, they can make it one-sided. And so if you have a potential legal claim that you can present as leverage, then you might be able to negotiate something mutual.
00:03:55
And the other thing about non-disparity provisions is this. The employer cannot promise that all of its employees, let’s assume it has 100 employees or 1,000 employees or 10,000 employees, they cannot bind themselves to what every single employee of the company may or may not do with respect to you. And so they can only control a small number of people you may have worked with.
00:04:16
And so to the extent you have a leverage to create a mutual non-experiment provision, usually employers go to insist that you just include a handful of people that they can actually talk to and control, not every single employee in the company. So those are the types of clauses that I typically see in severance agreements. There’s one other point I would want to bring to your attention.
00:04:39
And that is, I would always ask clients to ask their employer to include an agreement, a mutual prevailing party fee shifting provision. And what that means is, is that if either party has to sue to enforce the separation agreement or the severance agreement, then if you prevail, you get reimbursed from the attorney’s fees for having to bring the out enforcement action.
00:05:03
And it’s important because employees don’t have a lot of money typically, and it’s a sunk cost that they have to spend for a lawyer to sue for, to enforce a contract that they have. And so I encourage employees to always ask. If you have any further questions about severance agreements, I would encourage you to come to Eric Siegel Law and ask away questions. We’re happy to help you.
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