1) Who is eligible for severance pay?
Any employee can be eligible for severance pay. Certain factors make it more likely that severance may be paid such as:
- Length of employment
- Employee’s performance record
- Company Policies
- If there has been any public policy violation
- If you have an ERISA plan -The Employee Retirement Income Security Act of 1974. (Some employees at a director or executive level may have this benefit.)
2) Do I have to be at a company for a certain amount of time to receive a severance package?
No, but typically the longer an employee has been at a company the more likely they are to receive severance pay or it may increase the amount.
3) Are companies obligated or required to give severance packages to their employees?
In most cases companies are not obligated to offer severance pay; however, some companies do have severance policies such as giving 2 weeks of severance pay for each year the employee was at the company.
4) Will the amount of time I have been at the company determine the amount of my severance pay?
There are many factors that determine the amount of severance pay, but the longer an employee is employed the more likely they are going to receive a severance package.
5) How is a severance package amount determined?
Severance pay is determined by several elements. Possible contributing factors are:
- Length of employment with the company
- Performance at the company
- Employee’s salary
- Company Policies
- Whether a bonus or commission is about to become due
- Whether there have been any Public Policy Violations (for example: discrimination, wrongful termination or retaliation from a whistleblower made by the company or any potential lawsuit that the employee may be able to bring against the company.)
6) How much time do I have to accept or negotiate my severance package terms and sign the severance agreement?
The amount of days an employee has to sign can vary. A typical number is 21 days. Under the ADA, if the employee is 40 or older they would have a minimum of 21 days to sign. The employer may allow you more time; the time limits are almost always identified in the severance agreement. To be sure of the time limits and your rights, it is always best to contact an attorney as soon as a severance package is received.
7) Am I giving up rights by signing and accepting the severance agreement?
In a typical severance agreement it will state that the employee is releasing the company from any claims and that the employee cannot pursue a lawsuit against the company regarding their employment.
8) Why should I consult with or hire an attorney to negotiate my severance package as opposed to attempting to negotiate it myself?
An attorney who is knowledgeable & skilled in the area of severance pay & separation agreements can add substantial value to an employee’s settlement. A severance package attorney can evaluate the employment situation to determine if there is leverage that the employee may not recognize such as violations of Public Policy including: discrimination, retaliation, harassment or other factors that will motivate the company to provide severance.
9) When should I contact an attorney?
Immediately. An employee should contact an attorney as soon as he/she receives a severance package or as soon as he/she knows the company is or might be letting them go.
10) Does my age make a difference in receiving a severance package or the amount?
Not always, but it can. If the employee is 40 years or over he/she should talk to an attorney to determine if there is a possible age discrimination claim. Furthermore, if the employee is 40 or older, the employee gets additional days to sign the severance agreement, 21 days at the minimum to review it.
11) Once I accept & sign the severance agreement, how long until I get my money?
The amount of time it takes for the employee to receive their check can vary. It typically states in the agreement when the checks will be produced. An average time is between 15 days to 30 days but in some cases can take as long as 45 days.
12) Can I receive severance pay if I quit my job?
In some cases an employee can receive compensation if they are resigning from a job. It depends partly on the reason the employee is quitting. An employee should contact an attorney before resigning to determine what their rights are. Once an employee has resigned from their position they may no longer be entitled to severance pay or other benefits such as EDD.
13) Does the size of the company make a difference in receiving severance pay?
No, the size of the company does not matter. However, larger companies may have more money to offer severance pay or they may have severance policies in place.
14) Can I receive severance pay if I was terminated?
It often depends on the reason for termination (Employee negligence vs. inappropriate behavior). Severance pay is less likely when there is a termination for cause.
15) Am I eligible to collect unemployment if I received a severance package?
The employee may be able to collect unemployment. The employee should consult an attorney in regards to unemployment to determine if they are eligible for those benefits. If an employee “resigns” they are usually not eligible for unemployment.
16) Can the attorney negotiate other terms of the separation agreement besides the payment amount?
Yes, the attorney is able to help negotiate the terms and language of the agreement as well as the severance pay amount.
17) What are typical terms in a severance agreement in exchange for severance pay?
The terms can vary immensely given the variety of situations for each employee, however, common terms in agreements are:
- Confidentiality Clause – The employee agrees to keep the settlement confidential.
- A Non-Disparagement Clause – The employee agrees not to speak poorly of the company.
- Release of all Claims – The employee agrees to release all claims against the company forfeiting the opportunity to file a lawsuit in regards their employment.
- Return of Property – The employee agrees to return all company property, such as: laptops, files, cell phones, keys, etc…
18) Can I sue the company after I have signed the severance agreement & accept the money?
Ordinarily no. Once you have signed the severance & separation agreement, you have released all claims against and waived your rights to sue the company. Exceptions may be fraud, duress or illegality of the terms of the agreement.
19) If I have already been offered a severance package & I retain an attorney to negotiate a larger amount can the company decide to pull their original offer?
Yes. Although it is uncommon, the severance package agreement is at the discretion of the company; they can choose to revoke the initial offer if a counter-offer is made.
20) How is the attorney paid after the agreement has been finalized?
The attorney usually receives a check from the company for his or her portion of the settlement. A typical fee for an attorney is anywhere between 33 1/3% to 40% of the settlement. The remainder will go to the client.
21) If I am being offered a severance package by my company & hire an attorney to negotiate a larger sum, does the attorney get paid on the total recovery or just the additional amount they obtained?
It depends on the attorney. If an attorney is able to negotiate a larger amount than was in the original offer, the attorney often takes their fee only on the additional amount they obtained. For example if the original offer was $20,000 & the attorney recovers and additional $10,000 for the client, the attorney only takes their fee on the additional $10,000.