Can I Negotiate a Severance Agreement?
*This is a transcript of the Facebook Live video from 5-3-18 Click here to watch the video.
I always say that any agreement is negotiable. Now whether or not you can negotiate terms that are acceptable to you, and pleasing to you is a different story. A lot of times the degree to which the company will negotiate is governed by a couple of factors. One, is it a reduction in force? In other words, are you the only person being handed the severance agreement?
Again typically, every situation is different but typically companies decide what they’re going to pay in severance in a reduction in force, and that pretty much is the deal and they’re not willing to negotiate it because they want everybody to be offered the same deal, and they don’t want to have to go back and renegotiate with people, or for it to get around well, one employee got more than another employee did. And so in those circumstances it’s typically not negotiable, but under certain circumstances, you may have some leverage if you can show exceptional circumstances.
Another situation is if it’s a one-off, in other words if the person’s being fired for a particular reason, it’s not part of a larger reduction of force, then that severance agreement may be a little bit more negotiable and there are lots of basis to negotiate severance agreement. The biggest is, do you have a claim … is there a claim for unfair termination, discrimination, harassment, or retaliation arising out of the employment that the employer would like to get a release from? If the answer is yes, if there’s a colorable claim, then the severance negotiation can be about what the value of that claim is and is the severance agreement commiserate with the claims being release? And that can take some time. I’d say typically the over under on that is a 120 days. Sometimes it can take longer, sometimes it can take shorter, but to engage in those negotiations and for both sides to do the investigation that they need to do in order to have those negotiations, it can take a couple, three, sometimes even four months between the time of termination and actually signing the agreement.
Sometimes you can negotiate severance agreements, severance payments particularly, based on the length of tenure or just fairness. There are many employers who particular if they’re firing someone, not for cause or because the person has poorly performed, but for some other reason, sometimes you can leverage that good will into a larger severance package. Now I caution employers and say that they really shouldn’t do that. They really should have a policy that if you’re going to offer severance, you ought to have a uniform policy that is applies across the board for precisely that reason. You don’t want to be accused later of favoring one type of employee over another. And if every severance is kind of its own negotiation, they can take on a life of their own and that may not be a situation for business reasons that you want to find yourself in.
Employees should always try to negotiate because you never know what the situation is, sometimes employers on those one-off situations will say, “Let’s start out with this amount and see if he or she takes it and we can always negotiate it up or down.” As I say with reductions in force, typically the company makes a decision on what it’s going to offer and it really is a take it or leave situation. It puts the employee a little bit in trick bag because if the employee has say a wrongful termination claim and they don’t feel that the severance is appropriate, then that may put them in the position of having to turn down and then litigate their case, and often times that can elongate the process a little bit and it’s a little bit more risky, and that makes it a very difficult decision.
I frequently spend a lot of time with clients examining their particular situation and weighing the pros and cons, particularly if the amount of severance is enough that they believe walking away from it would be a tough thing to do. Definitely not an easy negotiation, or risk-free negotiation, but often a necessary one.