You might be led to a conference room for a meeting with HR, or put on a Zoom call, and told you’ve been let go. Now what?
If at this meeting, HR brings up the possibility of a severance agreement, it could seem like a hopeful prospect. You might feel momentarily relieved by the possibility of severance pay. Yet it would be a mistake to take your company’s severance agreement at face value or sign it immediately.
If you are ever in this situation, it’s best to be prepared and know what you’re legally entitled to. Most importantly, you are allowed to negotiate and ask for the security you deserve. It starts with the mindset of seeing a negative situation as an opportunity for growth and believing that you are worth more than a corporate buyout.
What is a Severance Agreement?
A severance agreement is a contract negotiated between an employer and former employee, detailing potential compensation and certain benefits in the event of the employee’s termination.
It’s important to understand that employers are not legally obligated to offer employees severance agreements and the compensation they provide. It is simply typical that companies offer these agreements when they decide to let go of an employee.
This raises the question: If employers are not legally obligated to offer a severance agreement, why would they?
The answer is that severance agreements are often designed to benefit the employer more than the former employee. These agreements are drawn up by the company, after all.
Usually, an employer offers a severance agreement in order to protect themselves from future lawsuits, such as a wrongful termination lawsuit.
This means that you should proceed with caution and read through any offered agreement carefully. Here are three key things to know to make sure you’re treated fairly.
1. There’s no such thing as a standard severance package.
Your company might tell you this is “industry standard” or “what we do for everyone.” But the truth is severance agreements have no standard requirements. You have the ability to reject or work out specific terms that are more favorable for you.
These agreements typically include severance pay, which might be paid to the employee in a lump sum or spread out in multiple payments. You may have already signed an agreement about severance pay when you were offered the job.
But look carefully at what other terms come with the pay. It may actually be in your best interest to say no to your employer’s first offer.
2. You can negotiate the terms.
Just because the company is forcing you out, it does not mean you can’t speak up for yourself. This is where you should read carefully and get creative. It might even be best to seek legal counsel for help with negotiation.
Terms you may want to keep in mind when negotiating with your former employer:
- The continuation of insurance benefits, such as health insurance for you and your family
- When your last day will be
- Non-compete clauses
Non-compete clauses might restrict an employee from working in a similar field, or with a competitor company, over a certain geographic area and for a specific amount of time.
If a former employer provides you with a severance package that includes a non-compete clause, read everything carefully and consider consulting with a lawyer. Signing a non-compete clause could limit your future career growth, and it may be in your best interest to walk away.
3. You are not required to sign.
You’re not required to sign right away. If your employer offers you a severance agreement with terms you don’t agree with, you can always walk away and ask for time to think about it. This is called a consideration period.
The time you have to consider the terms of your severance package varies. For example, an employee under 40 is only guaranteed a reasonable consideration period for their severance agreement. This could mean you are given a few days or a month, but it’s dependent on your former employer and the terms outlined in the agreement.
Employees over 40 are given a more definite consideration period. If you’re older than 40, you have 21 days to review and sign the agreement and 7 days to revoke your signature.
Take your time. While an employer might pressure you to sign a severance agreement right away, you have the right to think, say no to unreasonable terms, and break the mold.
You’re In Control
Being let go of your job doesn’t have to be the end of the world. A potential severance agreement might be a place where you can innovate and negotiate terms that benefit you.
Who knows, maybe this can be an opportunity for you to work for yourself, do some soul searching, and start your own business. The path to entrepreneurship is as rewarding as it is challenging. As they say, “when one door closes, another opens.”