Severance Package Review

Many times when a company decides to terminate an employee due to performance, reduction in force or retirement, it will offer a Severance. Here are some points for consideration related to a Severance Agreement:

In Texas, severance is not required by law. Reasons a company may provide a severance, even if one is not required by law:

  • Recognition and reward for an employee’s performance, or years of service.
  • Pursuant to a written severance plan—which is not typically the case.
  • To protect it from litigation.
  • If a company provides a severance agreement, it will generally require that you release any and all legal claims, whether you know, or even if you don’t know, what those legal claims are.
  • A severance agreement is typically drafted by the Company’s attorney.
  • Things you should be aware of if you are presented with a severance agreement
  • Since the agreement is drafted by the company’s attorney, and you will be required to release all of your legal rights and claims if you sign the document, you should have the document reviewed by your attorney
  • If you are over 40 years old, the company is required to give you at least 21 days to consider signing the release, and you would have up to 7 days to revoke, or take back the agreement if you decided you didn’t want to go through with the release.

You may be able to negotiate better terms and conditions of the agreement, but keep in mind the following:

You should always have an attorney review the document with you so you understand the agreement.

If you decide to negotiate, you risk losing what the company offers in its original agreement. In other words, if you do not accept the company’s proposal, as written and proposed, you run the risk that negotiating would be viewed as a rejection of the company’s offer and your counter proposal for the company to accept, or reject. Once you begin negotiating, the original agreement has technically been rejected and you are making a counter offer.

You should have an attorney evaluate whether you have:

  • Legal claims, if any
  • Whether the terms and conditions in the agreement are fair
  • How much the company is offering as severance
  • The tax implications of the amounts offered
  • Whether there are other terms and conditions the company may be able to offer, including outplacement, and payment of COBRA.
  • How the company is characterizing your separation of employment;
  • How the company will be responding to inquiries from prospective employers

Other considerations – The company typically places other provisions in a severance agreement, which you should have reviewed with an attorney, including:

  • Non compete provisions
  • No re-hire provisions
  • Confidentiality provisions
  • Non disparagement provisions
  • Non solicitation provisions
  • Cooperation provisions
  • Arbitration provision
  • Your entitlement to unemployment
  • Bonuses and stock provisions
  • Provisions regarding unpaid, but earned, vacation and sick pay

Whether a severance is offered, or not, you should have a Board Certified in Labor and Employment Certified by the Texas Board of Legal Specialization attorney evaluate your circumstances before signing away your legal rights. Clients must understand the risks, and benefits, associated with severance agreements.  At the Law Office of Jeffrey A. Goldberg, we help clients understand those risks and routinely negotiate severance agreements. Call our office today to set up an appointment to review your severance agreement. 210-690-2200.