When to Negotiate Job Offers and Severance
Timing of Employment Negotiations
Information about Severance
Severance Pay Guidelines and Resources
Severance Pay Guidelines
Severance Negotiation Tips
Do I have a right to Severance Pay?
Generally, no. But...if you have a contract providing for severance or the employer maintains a Severance Pay Program that covers your circumstances, then yes. Additionally, mass lay-offs can trigger a pay in lieu of notice obligation for the employer under the WARN act, (or Cal-WARN), if the scenario falls within the statute's protections.
Most severance pay is voluntarily offered by the employer and is intended to secure the goodwill of a employee that's not voluntarily terminating employment. It also serves the employer's interest in acquiring a release of certain claims that employee might later bring against the employer.
So, does Severance Pay come with a catch?
You might say so, though if you have complaint against the employer ... then giving-up the right to complain is not giving up much. Any new restrictions or agreements which come with severance, like a non-disclosure and non-solicitation agreement, should be carefully scruntinized. Restrictive covenants can interfer with your future employment or other conduct.
Can I negotiate for more Severance Pay?
Yes; but, if you reject the employer's initial offer with a counter-offer there's no guarantee the original offer will still be on the table. However, most employers won't penalize you for asking for more, though you it's mostly about negotiatng leverage. The more eager the employer is to negotiate with you the more suspicious you might be about the release agreement you'll sign. Make sure you fully understand what legal rights you'll be releasing. Many employees will seek the advice of an attorney before responding severance offers or attempting negotiation, and they usually end up better off as a result.
What rights do Severance Agreements usually ask that I give up?
Commonly, releases will require you waive all your legal rights, known and some unknown, to later sue that employer or complain to state of federal employment agencies about your former employment relationship. These may or may not be enforceable depending upon whether you knowingly and voluntarily waive your rights, and whether the release conforms to federal and state law. Regardless, this is a subject better addressed to the competent attorney you've chosen to partner with. Additionally, confidentiality is usually demanded.
What's a fair amount of Severance, what's common practice?
The old time rule of thumb was - nothing for hourly-paid employees, a week a year for salaried employees, a month a year for executives. This means virtually nothing today, an employer may offer severance pay that's significant less or more than any so-called benchmark.
For example, one modern approach / formula is one month of pay for every $10,000 in annual salary to be replaced, for example; $45,000 per year salary = a severance expectation of 4.5 months pay = $16,875.00. Again, this is merely a guideline, in today's economy employers severance practices less generous, be careful of your expectations.
What has been common practice by your employer in past situations is something you might cautiously investigate. And ... it is true that employers are far more likely to pay severance to senior managers and executives.
How can I find out about our employer-sponsored Severance Pay Program?
I your employer has one, you should be able to receive a written copy of the program simply by asking HR.
Why would I need an attorney to review and advise me about a Severance Pay offer?
Just realize you'll likely get one chance at understanding and agreeing to a severance pay offer, and it will likely involve your waiving legal rights against that employer forever. If you have reason to feel uncomfortable about the situation, well, partnering with an attorney will offer some security and third party perspective.
Severance pay is not wages for California unemployment insurance purposes. There is no specific code section in the California Unemployment Insurance Code which declares that severance pay is not wages. Teh EDD cites Section 1265 stating that severance pay is not wages. The authority for doing so is based on a case decided by the California Supreme Court in 1965. The California Supreme Court held in Powell and Byrd vs. California Unemployment Insurance Appeals Board (63 Cal. 2d 103, 1965) that dismissal and severance payments were not wages for unemployment insurance purposes. EDD
Severance pay is wages for FICA withholding. The US Supreme Court concluded that severance payments fall under the broad definition of wages in FICA and that regulations which Congress enacted to address a narrow problem with income tax withholding, did not alter the FICA definition. UNITED STATES v. QUALITY STORES, INC. (2014) 693 F. 3d 605.
Controlling Your Timing & Their Pace
Many experts refer to the “ripeness” of potential deal, when the power and pain have matured or ripened to the degree that both sides are ready to settle. In the context of an employment separation, this ripening seems pressure cooked -- it’s not unusual for the Human Resources department to leave the impression with a terminating employee, or employment offer, what's offered needs to be accepted or declined in a matter of days.
In contrast, for age 40 and older employees, a knowing and voluntary waiver of rights under ADEA (and FEHA in California) cannot occur unless an employee has been given 21 days from the final separation & release offer to sign, (29 C.F.R. 1625.22 (e) (6)), or 45 days if multiple people are subject to a similar laid-off. Yet, even though federal and state law provides for a lengthy deliberation period it is common for the employer to suggest to the employee the decision to accept or decline is immediate, and it is simply a reality that the longer one waits to sign – the longer one waits to get paid.
It’s natural to want to get things settled quickly. It is also natural to put decisions off. Neither approach is healthy practice in deal negotiation. Controlling the timing of this deal is important.
If the employer/Human Resources can encourage you to make immediate decisions it’s far less likely you’ll identify what wrong in the agreement offered and negotiate better. You might actually be encouraged to object, argue and negotiate with Human Resources almost immediately, before you have done a close examination and value assessment of what’s being offered. So, “too fast” timing puts you, the leaving employee, at a significant disadvantage. You don’t know for sure what you are signing, and you haven’t explored how you might do better.
“Too slow” timing on your end is equally damaging. For example, waiting until the end of a 21 or 45 wait period for release agrements reduces your leverage, make your asks & objections seem like after thoughts or whining about the agreement terms vs. real negotiation.
And, it is not just about when you sign. During the negotiation dialogue with the employer you should control the pace, the rhythm of negotiation. You do not want to respond too quickly, much like being at the end of a leash being pulled by the employer’s representative, e.g. controlling your behavior, jerking you around. You do not want to be unresponsive, too dilatory in responding sucks the energy out of a negotiation dialogue and may lead to a take it or leave it final answer.
So, timing is a negotiating tool, but used incorrectly it can kill the deal. Every interaction, every cycle with a prospective employer, your employer, pre and post termination should be time managed and be intended to further your objectives. Even down to the days and times you send reply e-mails, whether you screen your calls, when you are unavailable when the employer wants to push its agenda.
I hear people say they are given no control in a negotiation with an employer. OK, so maybe this is one small way to bring mature control and tactics to the negotiation.
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The Velocity (Timing) of Employment Negotiations (2016)
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