A: A severance agreement spells out the conditions for a job termination, including what pay and benefits are offered to the employee. There is no requirement that an employer offer this. In exchange, the employee usually must agree not to sue the employer.
An individual is not required to sign a severance agreement. You may not like the terms being offered and want to negotiate for better ones. You may decide against signing the agreement if you intend to file a lawsuit and do not want to accept the benefits offered in exchange for agreeing not to sue. Weigh the pros and cons of accepting or rejecting a severance agreement before deciding whether to sign.
What is typically contained in a severance agreement?
The agreement should include specific information about all terms of your separation including:
- The effective date of your termination. A termination date often affects eligibility for certain benefits.
- The amount of severance pay or salary continuation. The total amount of your compensation and an explanation of how this payment will be made (e.g. bi-weekly or a one-time "lump sum" payment) should be included. Any vacation time that you have earned but have not yet taken must be paid to you.
- Tax withholding. Whether or not taxes will be withheld from your compensation.
- Bonus pay. If you would normally qualify for a bonus on a certain future date, you may be eligible for a partial or prorated portion of that amount.
- Eligibility for unemployment insurance. If your employer agrees not to contest your receipt of unemployment insurance, this should be recorded in the severance agreement.
- Insurance continuation. Under COBRA, you may have a legal right to continue your current medical, dental, prescription, and vision coverage for eighteen months. You are responsible for payment of the insurance premiums unless the agreement states otherwise.
- Pension. If you are covered under the organization's pension plan, the impact of your termination on this plan should be explained.
- Benefits unique to the place of business. If the organization has other benefits such as a profit sharing or a sabbatical program, your agreement should clearly state what will happen to these benefits.
- Release. In exchange for compensation and benefits after your employment ends, the severance agreement requires that you promise you will not sue.
- Non-compete. A statement may be included that states that you will not work for a competitor of the organization for a specified amount of time.
- Company property. If you possess any company property such as badges, keys, corporate credit cards, a computer, etc. you may be asked to return it.
- Confidential or proprietary information. Standard wording in severance agreements prohibits divulging information that is designated as confidential or proprietary. If there is any question regarding what this covers, it should be clarified before signing the agreement.
I'm feeling pressured to give a quick answer. Is this right?
You should never be required to sign an agreement immediately. The employer should give you a reasonable amount of time to consider the severance offer, including time to contact a lawyer to review it if you choose.
Should I hire a lawyer to approve this agreement before I sign?
This is strictly a personal decision. Many individuals choose to have a lawyer or a financial advisor review the severance agreement before signing it. The benefits of having an experienced professional review this document include having a neutral party, who is familiar with these agreements, explain complex and sometimes confusing language, including what you will receive and what you are agreeing to. An advisor can also assist in negotiating more favorable terms than the employer offered. They can help you decide if it is to your advantage to agree not to sue.
A: An attorney is not required to file a discrimination claim with an enforcement agency (such as the Equal Employment Opportunity Commission). However, it may be useful to speak with one before doing so. An attorney can explain whether your situation is illegal or unfair, what options you have and the possible results. You may also want to talk with an attorney about legal assistance at work (e.g., negotiating a hiring or termination agreement) that does not involve a lawsuit.
Where do I find one?
- Bar associations - American, state, county, municipal
- Local law schools - call to see if they have a clinic that covers the area in which you need help
- Legal Assistance Foundation - income eligibility requirements; local chapters throughout the country
- Attorney Referral for Wage and Hour Claims
Arrange a consultation with the attorney before hiring.
- Call the attorney and briefly explain your situation. If a consultation is arranged, find out if there will be a charge and if so, how much it will be. The consultation is a chance for both parties to interview each other and decide if they want to work together on this case. Therefore, you may have more than one consultation before finding an attorney you want who also wants to represent you.
- At the consultation, ask the attorney questions about your legal rights, for example: What claims and laws apply to your situation? What are the advantages and disadvantages of choosing one way to proceed vs. another? What relief is available (usually money, but could also be an action like rehiring)? What is a realistic timeframe for the case to be settled? The attorney should ask you about when the problems occurred. This is important because there are various timeframes for filing different charges.
- Ask the attorney about other cases he/she handled similar to yours. How many? What were the outcomes?
- Inquire about fee arrangements. For example, does the attorney charge an hourly rate, work on contingency (percentage of what is recovered) or ask for a retainer? How does the attorney charge for office time and court time? Are there expenses that will be charged to the client? What are these and what is the anticipated cost? What is the estimated total charge for a case such as yours?
- Ask the attorney to provide references and check them.
A: Employers would like to obtain as much information as possible to determine if the applicant is able to do the job and is a “good fit” for the organization. But some interviewers may ask inappropriate personal questions that could lead to you not getting the job.
While asking a pre-employment question is not illegal, the information obtained could be used to discriminate against you. In other words, you can't claim discrimination when the question is asked, but you may have a valid claim if you can prove that the information you provided is the reason you didn't get the job.
When confronted with a personal question, try to focus the answer on your ability to do the job. If the interviewer asks if you have young children, which most likely has nothing to do with the job, you could ask whether the company wants to determine how flexible your schedule is because they really want to know if you can travel. Try to figure out what the interviewer really wants to know and sell yourself by addressing that specific concern.
Some examples of legitimate and potentially discriminatory questions:
Photograph: An employer may require a company photograph after you are hired, but requesting one with an application or after an interview poses the threat of discrimination.
Age: An employer can legitimately ask, “If you are hired, can you provide proof of age?” to determine if the applicant meets certain minimum age requirements.
Education: Providing necessary credentials or training may be required of applicants, but a request for the years of attendance or graduation poses the threat of discrimination.
Citizenship: An employer can determine if an applicant has a legal right to work in this country, but an inquiry about citizenship or national origin poses the threat of discrimination.
Birthplace: Asking where you or your parents were born poses the threat of discrimination.
Language: There could be a legitimate business reason for an employer to know what language the applicant speaks or writes fluently, but how you learned a foreign language, what language you originally learned, or languages commonly spoken at home pose the threat of discrimination.
Arrest record: An employer has the right not to hire a convicted felon, but this does not apply to arrests.
Religion: There is no legitimate business reason to ask about an individual’s religion, including what religious holidays you observe.
Background check: You can refuse to authorize a background check, but companies have the right not to hire those applicants, as long as they are doing background checks on all applicants.
Marital or parental status, and sexual orientation: Although not covered by federal law, your state or local employment laws may prohibit discrimination based on these categories.
A: There are a number of things you should do if you have been told that you are fired.
Determine if the employer followed their own rules and procedures in firing you. Is there an employee handbook that spells out the rules of what should happen when someone is fired? If you were told that your firing was based on performance, were you given a chance to improve? Were you given a warning?
If there are no written rules, what has been done in the past? This so-called "past practice" can take the place of written rules. Determine if you were treated the same way as others were treated in the past.
Make sure that you receive all of the pay and other benefits that you are owed. If you have not received your final paycheck, vacation pay or severance pay (if the employer has a policy to pay severance) you have a legal right to collect your final compensation. Contact the Wage Claim Division of your state Department of Labor to file a complaint.
If you had health insurance coverage through your employer, the federal government requires that you must be offered an option to continue your group health coverage. COBRA, as this law is called, applies to employers with 20 or more employees. If you choose this, you will be required to pay the entire cost of the coverage. Some states have similar laws that apply to employers with less than 20 employees.
You may also qualify for unemployment insurance. Each state provides benefits to individuals who lose their job through no fault of their own. The benefits and eligibility differ by state. You should contact your local unemployment insurance office and apply for benefits as soon as possible after you lose your job. For a more complete explanation of unemployment insurance go to www.workplacefairness.org and look under "Your Rights"/"Unemployment Insurance."
Keep a record of what happened. It may be helpful for unemployment or other claims you may file. This should be done right away so that important information is not forgotten.
You should begin by recording important dates such as when you were hired, when you received performance feedback, and when you were told that you were losing your job. Next, you should fill in the names of the people who hired you, supervised you, co-workers, and who fired you. Then record what was said and the reason given for your termination. When you finish, have someone whom you trust, but who does not work with you, read what you wrote to make sure it is clear to someone else. When you are satisfied with the record, put it in a safe place. Never give your copy to anybody else. If they need the information, make a copy for them.
A: Most states are "employment at will," which means a company can fire someone for many reasons without it being illegal, although it might be unfair.
Firing someone is illegal if:
1) It violates laws against discrimination
Discrimination is when an employer treats you differently than other workers because of your sex, race, color, religion, national origin, age, or disability. For the employment action to be discrimination:
- You must have been qualified for the job; and
- The employer treated you worse than someone else because of your sex, race, color, religion, national origin, age or disability; and
- The employer intentionally discriminated against you
2) It is a breach of contract
An employer could be bound by either a written or an implied contract. For example, they hired you to run a conference in June but fired you in March. Also, the employer could be bound if it has a policy manual with rules regarding termination and the employer did not follow those rules. For example, was a warning required, or is there an appeal process?
3) It is a civil wrong
Civil wrongs could refer to many different illegal situations. For example, maybe your employer fired you for reporting unsafe working conditions or perhaps they defamed you and damaged your reputation.
For more information on laws and resources, see Your Rights On The Job.