Top 10 Exit ~ Severance Negotiating Blunders/h1>

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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.

Notable Decisions:

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.
                Top 10 Negotiating Blunders


I do not recommend a Do It Yourself approach to exit packages and severance negotiations.  Even the best negotiator benefits from a third party perspective and direct experience dealing with similar tactics and issues hundreds of times.  

But if you are going to negotiate for your exit and your package, these are the common negotiating errors and dysfunctions I’ve seen exiting employees suffer: 

# 1 – Premature Negotiation & Demands: Pushing for too much too soon is a huge mistake. It is too often attempted in exit interviews or the day of separation.  And, an employee might be expecting/demanding immediate answers. Well, they often come and they’ll likely be disappointing.  This should be a carefully crafted process; anything attempted quickly, without pre-thought or preparation, invites the quick answer.

# 2 - Verbal Negotiation:  The informal mode of communicating negotiating positions invites thoughtless responses and the back and forth is off the record. If progress is achieved, there is no record of promises made and the opportunity to back-track is always present. 

# 3 - Polarizing Anger:  Passion is a positive and so is emotion.  But if it spills into a dialogue filled with anger the parties are more likely to adopt fight or flight behaviors. Game over.

# 4 - Collateral Issues: Sure, there is a lot to talk and argue about, but straying from the objectives of the negotiation will invite the same in response.  The fact that there have been a variety of bad behaviors during your employment relationship does not alone justify the terms of the final agreement being negotiated. 

# 5 – Going Out of Bounds: Asking for too much, or something employers just don’t give, undermines the credibility of the negotiation. The tactics and demands need to be credible, with business practicality.

# 6 – Seeking Revenge & Justice:  Expecting the company or its management to change is a waste of energy and runs into the problems discussed above. 

# 7 - Litigating Employment History: This is not about winning an argument; this is about a negotiated resolution.  The employer is not going to accept your version of the past. 
# 8 - Legal Threats: Threatening legal action moves the negotiation to legal counsel’s office, and ends of any effort to arrive at a good faith business resolution.

# 9 - Tunnel Vision: Better severance might be the light at the end of the tunnel, but the standard package has many other benefits & features – some of which have serious monetary or reputation value. This is a package with several components, not one benefit.

#10 - “God is in the details”: As the architect correctly pointed out, thee is reason to be rigorous and detailed oriented in reviewing all the components. There is a reason these separation and release agreements are 4, 8, or 15 pages.  What is the employer promising, what aren’t they promising, and how will it affect you in the future?   

Copyright 2003 - 2018, Thomas C. Walker, Esq. All rights reserved. 
 
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Top 10 Exit / Severance Negotiating Blunders (2018) 
Disclaimer -- These Articles are not legal advice; this entire website and its contents are general information for California employees. For legal advice, consult your lawyer or hire me! No interaction with this website creates an attorney-client relationship or privilege. Attorney Advertising. Thomas C. Walker, Esq. © 2015-8. All rights reserved.
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