Severance Package Review

What is a Severance Package

A severance package provides compensation and payment to a departing employee. In exchange for paying the employee something of value, the employee would be required to execute a comprehensive release of any and all legal claims. The severance package, and the accompanying release, were drafted by the company lawyer, or law firm hired by the company. You have a right to have your San Antonio severance package attorney will help you review the terms and conditions of the document to ensure you understand the documents, as well as the respective obligations and responsibilities between the employer and employee. 

The Law Office of Jeffrey A. Goldberg helps employees and executives review the severance package to understand the terms and conditions of the release of claims, as well as assess any legal and practical leverage the employee may have to negotiate severance agreements. It is important for employees and executives to have their own attorney review the documentation because the company lawyer drafted the documents and any release will waive any and all legal claims—whether you may know about the legal claim or not. 

A severance package typically includes some form of payment—either in a lump sum, or paid out over time. The amount of money paid, and how the money may be paid, are material terms of a severance agreement. In general, it is in the employee’s best interest to have a lump sum payment, depending on the taxes related to such payment. An employer may prefer to pay the severance amount out over a period of time for several reasons. First, and foremost, a payout gives the employer an opportunity to ensure the departing employee is complying with the terms and conditions of the release. If the employer believes that the employee may be violating the release [i.e. discussing or disclosing confidential information], the employer may stop payment and claim the employee is violating the agreement. Another reason a company may want to pay out the severance over time relates to the financial condition of the company—the company cash flow may dictate a payout over time versus a lump sum. 

Whether the severance payment is a lump sum, or paid over time, it is important for the employee to have their tax advisor or accountant to review the severance agreement and advise the employee or executive as to the tax consequences associated with the severance payment. The severance agreement and release will specifically allow the employee to have their attorney and tax advisor to review the documentation and to advise the employee. 

Reasons a company may offer a Severance

In Texas, a severance is not required. However, there are a number of reasons a company may offer a severance. The primary reason is to have the employee sign a global release of any and all legal claims against the company.  This prevents the employee from filing any lawsuits or claims against the company. The company also may require the employee to agree not to compete for a period of time that the company provides severance. A company may offer a severance and include language in the release that re-affirms an employee’s commitment to non-disclosure of confidential information and to ensure the return of all company property, including confidential information. Finally, the company may want to reward the employee for their dedication, hard work, and length of service by providing a severance. 

What you should do if you are offered a severance

If you are presented a severance, along with a release of claims, you should immediately contact Jeff Goldberg, the experienced San Antonio severance package attorney at The Law Office of Jeffrey A. Goldberg to assist you in evaluating the severance. If you are 40 years old, or older, the law provides you with at least 21 days to consider the release, and up to 7 days to revoke the release after signing. 

You should not sign the release when you presented with the document, particularly after you have just been informed you may be losing your job or will be laid off.  Take time to consider the document with an attorney so you understand the agreement and do not make an emotional decision to sign away your legal rights. 

Should you negotiate your severance agreement

You should not try to negotiate your severance on your own. 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. 

Before any negotiation takes place, you should have the experienced San Antonio severance packaged attorney at the Law Office of Jeffrey A. Goldberg review and 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
• 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 and whether the company will advise if you are re-hirable, or not;
• How the company will be responding to inquiries from prospective employers. 

It is important to understand whether you have legal or practical leverage before you negotiate a severance because once you begin negotiating, you risk what has been proposed. 

There are other provisions of a severance agreement that can impact your future employment, which you should have reviewed with a San Antonio severance package attorney, including:

• Non-compete provisions
• No re-hire provisions
• Confidentiality provisions
• Non-disparagement provisions
• Non-solicitation provisions
• Litigation cooperation provisions
• Arbitration provision
• Your entitlement to unemployment
• Bonuses and stock provisions
• Unpaid, but earned, vacation and sick pay

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