After years of dedicated service, your company has suddenly terminated your employment and offered you a severance package. You will likely wonder whether the severance offer is negotiable and whether you will be eligible to receive unemployment benefits. The answer will depend on the details of the severance agreement and the circumstances surrounding your discharge.
Severance Offer DeadlinesFirst and most importantly, you must be cognizant of your deadlines. For example, if you are 40 years old or older and your employer is asking you to release any claims you may have for age discrimination, the Older Workers Benefit Protection Act requires that you be given 21 days within which to consider the agreement. The Act also requires a 45 day review period where a group or class of employees is affected. In either scenario, you will have 7 days after you sign the severance agreement to revoke your acceptance. If you are under 40 years old, your time period to review a severance package is at the complete discretion of your employer. Typically, we have seen deadlines span just a few days to several weeks.
Severance Pay In Exchange For A Release Of Legal ClaimsMany employers will condition a severance package on a release of your legal claims, in which you legally promise not to sue the company in exchange for a certain payment. If that’s the case, under current law, such a severance offer will not preclude you from receiving unemployment benefits. Of greater significance, the release of claims can also be a source of leverage in negotiating a more generous severance package. In general, the stronger your legal claims, the more severance an employer will pay. If your termination appears to be in retaliation for reporting unlawful conduct or based on your status within a protected class – such as age, race, gender, pregnancy, handicap – you may have substantial leverage to negotiate a more generous severance package. This will be a detailed discussion for you and your attorney.
Severance Agreements May Create New ObligationsFinally, it is not uncommon for employers to require departing employees to affirm non-compete obligations, which can stall an employee’s career development and create unexpected financial hurdles. It is essential that you understand your employer’s expectations before you accept any severance and, where necessary, narrow the breadth of your non-compete obligations to ensure that you can more quickly become gainfully employed in the industry that you know best.
Severance Packages Are Created By The Employer’s AttorneysAny severance package offered to you has been drafted by the company’s attorneys to serve your employer’s interests. Regardless of how the severance offer is verbally presented, only the terms contained in the written agreement that you are asked to sign matter. In fact, severance agreements typically contain “zipper” clauses, which make clear that only the promises contained in the contract are valid. As soon as you receive a severance offer, make it a priority to find an attorney who can evaluate your potential legal claims and help you understand the numerous pages of legalese drafted by your employer’s counsel.
Severance Pay as “Wages” Under the Massachusetts Wage ActAlthough rare, an employer could attempt to renege on an enforceable severance agreement, forcing the employee to bring suit to collect payment. Failure to pay severance may subject an employer to mandatory treble damages – automatically tripling the amount owed to an employee – under the Massachusetts Wage Act.
In Juergens v. MicroGroup, for example, an employee claimed that his former employer’s alleged failure to pay severance under an agreement violated the Massachusetts Wage Act. In denying the employer’s motion to dismiss the claim, a Massachusetts Superior Court noted that, consistent with the Supreme Judicial Court’s ruling in Wiedmann, “a more expansive definition of ‘wages’ is appropriate and it should not be limited to exclude severance pay.” In contrast, later in Birnbach v. Antenna Software, a Massachusetts federal district court held the opposite. In doing so, it relied upon the Massachusetts Appeal Court’s unpublished decision in Platt v. Traber, which serves as persuasive, non-binding precedent.
Overall, many unique legal issues can arise when negotiating a severance package. Clearly and thoroughly articulating your former employer’s legal exposure for wrongful termination is essential to maximizing a severance offer. Equally important is understanding and, where necessary, revising non-monetary terms especially any language surrounding ongoing non-compete obligations.
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