Employee Survival Guide® - How to Negotiate a Severance Package With Your Employer

Starting point is 00:00:00 Hello, this is Mark Carey, and welcome to this edition of the Employee Survival Guide, where you can learn everything your employer does not want you to know about and more. In this edition, we'll talk about how to negotiate severance agreements. Severance agreements are the primary way clients come to our office, and we evaluate them on a daily basis. We'll have anywhere from, well, 10 or more, 20 of these cases at a given time. And out of severance agreements or the review of severance agreements for clients, we develop client cases. And I'll get into the more specific of this later in the episode, but we really, our entrance into the

Starting point is 00:00:39 client case is through the severance agreement. And I wanted to walk you through the basics of what we do so you know what to do when your situation arises. Unfortunately, that may be that you have a severance being offered to you and you've lost your job. The role of severance agreement negotiation is probably the most prominent thing that we do in our office besides litigation. It is something we encourage because obviously it's creating settlements between parties. We like that. We don't want clients paying legal fees for a long duration. No one does. And so getting to the heart of the issues for severance negotiation, it's all about what your leverage is. And first leverage is you need

Starting point is 00:01:22 to have an attorney, an employment attorney specifically. But without the attorney, the employer is going to size down your severance offer to you. Essentially, he said, you just have to take what they offer you and you don't have the leverage to increase the offer. And what the employment lawyers do is create the leverage for you. Now, you're going to have to spend money, unfortunately, to hire experienced employment counsel to develop a case, evaluate whether you can assert claims and create more leverage and in the end, get more money out of the employer. We as a firm do not participate in the outcome of client cases in terms of their

Starting point is 00:02:02 severance. We believe, or I believe as the founder of the firm, that we want the money to go back to you to pay for the financial needs that you have. We do our job and we do it well and we move on to the next client. It's very important to look at the severance negotiation in a way that we look at it and try to look at it objectively from your end. And I'll get into that in the specific issues in a second. But first and foremost, we need you to explain what happened, the facts leading up to the termination. And by that, I mean we need a written narrative.

Starting point is 00:02:37 If you're not creating a narrative about your case and you expect the lawyer just to read your mind, forget about it. And the employer is not going to do that. So we, as a practice, we require clients to create a detailed chronological narrative. The longer, the better. Oftentimes you get quotes from the opposing counsel that the client had recorded conversations. In fact, often clients have great memories, and they're able to pull

Starting point is 00:03:05 together all the information to the narrative in one source. For example, you can use Slack, text message, email, anything, your memory, most important, I can't underestimate the value of your memory to contribute to the narrative. And you're going to dump everything you can into that narrative. And why go through all that effort? Because the power of the narrative has a direct correlation to the amount of money you're going to receive in severance. And this is something I can't understate to you. So get your narrative together. But before you get your narrative together, call us and we'll have a conversation. It's free of charge, of course, which you're trying to understand if there's anything we can do.

Starting point is 00:03:45 But we're going to try to explain to you in that conversation. I'll try to do my best right now in this edition of the podcast to tell you that when you look at your fact pattern and you create your narrative, you're basically using one language. And we're using another language, what the law requires. and we're using another language, what the law requires. So you need to do some learning about, and we provide this detailed background learning for you to understand. In our website, if you just spend the time and read the articles and the different practice areas depending upon your claim, you'll be able to issue spot or fact spot the things you need to create the claims.

Starting point is 00:04:19 For example, if you have a sexual harassment claim, you're going to want to identify all the specific examples of how you're treated differently because of being female or male or transgender or sexual orientation, and how other people are treated differently than you, more favorably typically. And so the details of the narrative will get into this kind of comparator type of treatment of you versus everybody else and help the lawyer figure out whether you have a claim or not to essentially ask for more money. So read articles, educate yourself about what the lawyers need, and hire an employment lawyer. I can't underestimate that issue. Hire anyone. You can hire our office or just hire an employment lawyer. And you'll understand why at

Starting point is 00:05:02 the end of the transaction, because the lawyer will guide you through things you didn't even know. It's worth the money. Again, I can't underestimate that value of hiring the lawyer. It's not a sales pitch to hire a lawyer. It's just simply, you need to know what the lawyers are dealing with and what the corporation's dealing with by the rules, instead of in your own mind, what you presume to be, because oftentimes that's incorrect. So down to the basics, the written narrative helps us understand if there are claims. We will then advise you about the different claims you have and how to go about it. And I can just go through the basics for you so that you are up to the speed on what those basics are.

Starting point is 00:05:42 The first basis are you need to get an agreement from your employer. The severance agreement is the method to which you're going to exit your employment. It's something that typically they're going to hand you. You're in shock to get it. You're in disbelief. You can't imagine your career, your identity. Everything's gone in a heartbeat. Didn't even see it coming. You need to actually throw all those pieces of emotion out of the transaction and identify the facts that led to what happened to you. Again, the narrative. So the lawyer is, when I approach these transactions, I'm objectively looking at what's happening. I can be empathetic to what you're going through, but I know to pierce through

Starting point is 00:06:24 that and look and challenge the client to get out the facts that I need to demonstrate what I'm trying to prove to the side. So emotions out. We'll deal them on the sideline. You know, I've got my years of experience providing mental counseling to people, although not a therapist, but I do my best. but I do my best. And if you put the time and energy into the case to evaluate your case with an employment lawyer, you'll reap rewards of that investment after you're done. Again, severance negotiation is a transaction. You're investing into it. Don't believe anything else. If you're looking for justice and all those other kind of principled ideas, you better have your finances in order to obtain that. In this legal economy, the issue of justice is very highly priced.

Starting point is 00:07:13 And it's not for everybody to go fight the full front litigation and challenge the employer. Of course, the employer has more money than you do. So the next thing is how much to ask for. So in terms of severance, there are no rules to what to ask for. And you can find yourself asking for maybe one, two X of your salary, sometimes three. For higher price executives or executives with compensation, executive compensation issues or incentive compensation, we're looking at other forms of agreements they enter into that enhance the severance being offered. And as for another podcast, I can talk

Starting point is 00:07:51 about those types of equity agreements and how they can potentially, you know, the method of determination determines what you get at the end of your, either you get an acceleration of your investing or not. But how much is too much is really the issue there for you to just figure out. And then employment lawyer will help you do that. And that is really kind of an unspoken rule that I can only offer is if you ask for too much, let's say three times the amount of your salary, or you ask for a million dollars to make it easy, you're going to find yourself in litigation with your employer. It's not something to be taken lightly, and you need to really

Starting point is 00:08:31 consider what you're asking for so that when you're asked is reasonable to the other side, and they say, okay, you're not being ridiculous in terms of your amount. But again, each case is factually different. Again, no rules to this issue. There are no laws saying what amount of severance you should be paid. People come at me all the time with the, you know, two weeks every year severance. And I say, show me where that is. And I'll get into the more specifics about plan benefits in a second. The third issue about, basic issue about severance is, you know, you're getting divorced from your employer. It means you're going to basically release your claims against the employer and thereby in your confidentiality,

Starting point is 00:09:10 meaning your silence. So be prepared to shut up. You can't write a book. You can't talk about the issues. There are some caveats on how they craft agreements. Sometimes the confidentiality is dealing with the agreement only in terms and conditions of the agreement, but not the underlying claims. That's actually preferable. But nonetheless, you can't discuss the agreement after you sign it if you want the money. If you do take the money, you've got to basically agree to say no comment when somebody asks you about it. The next one is number four, the most important part. This goes back to the factual narrative is how to leverage up.

Starting point is 00:09:45 You need to find some type of claim to hook on to ask for more money. For example, a breach of contract or an age discrimination case or a wage violation. And if you don't have those types of claims or any claims, the employment lawyer is going to deal with more of a kind of a goodwill, at will, you know, give me some more money because he's a nice guy approach. But nine times out of 10, that does not really work. A lot of clients think to want to surpass or bypass our processes and do that. They're not successful. They turn around, they say, okay, that process didn't work for me. So what do you suggest? So you file a process.

Starting point is 00:10:26 We have one. It works. Essentially, it says basically give me the narration of the claims. We turn it into an affidavit. We send the employer a notice of claims letter. It looks pretty formal because it is. It's on letterhead. And it directly confronts the employer, and it spells out a narrative.

Starting point is 00:10:43 You know, that narrative you're listening to so often now in the political season or, you know, any narratives are out there. They're being curated. And that narrative is, for your case, is the same thing. We need to find what is that story that's going to just infuriate the employer. And it has to be factually based. Oftentimes we uncover these scandalous behavior by employers and they're just ashamed that it has happened. And it happens to public companies. It happens to companies, not-for-profits even. You just have to dig

Starting point is 00:11:19 deep into the fact pattern and find out what's there because there's always a skeleton in every employer's closet. And so with the narrative affidavit and the notice of claims and a third document we use called a notice, I'm sorry, a demand, which is identical to the notice of claims, but it puts forth a demand. The notice of claims and the demand letter are two separate types of documents. One's an evidentiary document, notice of claims, that tells the insurer or company that we have a problem. The employer will tell the insurance company that to put a claim in. And then second, the notice of claim, I'm sorry, the demand letter is a non-binding, non-evidentiary document that's used. And it can't be introduced in a court of law because it's not a piece of evidence. But those three documents will get the conversation started with your employer.

Starting point is 00:12:10 And I can't emphasize that enough. And you have to proceed along that route because you are essentially telling the employer under oath that these facts happened, you screwed me over, and you're going to pay for it or we're going to sue you. And most employers these days in 2020 want to avoid litigation. They want to avoid the use of outside counsel. They want to avoid running up the costs. And I wrote about in an article years ago that employers are more addicted to the severance agreement and getting it from you than you are of fear of losing it or having it being taken off the table, which I am asked all the time. The agreement's never taken off the table, and the employers always want to negotiate it because it's in their best interest. The next item I want to talk about is the non-competition and non-solicitation provisions

Starting point is 00:12:56 that are either in the agreement, the settlement agreement, or they're in previous agreements that you want to get rid of because they are restricting your ability to work. And why do you want to do that? Well, we want you as the employee to become a free agent after you leave. Let's say you were fired for discriminatory basis. Do you think it's fair for the employer to hold you to a non-compete after the fact when they screwed you over and fired you because of age? No, it's not fair. And these days, especially during a pandemic, we want people to be working because as we know, 40 million people got laid off. So getting and attacking the non-competition, we do that during the severance negotiation in the form of what we say a declaratory judgment type of claim, where we attack the underlying what's called consideration for the agreement, meaning that, did you intend to have a non-compete? Well, no one wants a non-compete. I mean, it's only favoring the employer. So we always attack that issue as we want you to be a free agent to go work because, you know,

Starting point is 00:13:53 what if you're 56 or 65 years old and you're just being fired after 33 years? You're going to have a hard time finding a job because there is age bias out there. And it's a lot easier to find a job if you don't have a non-compete. That makes sense, right? Yes, of course. So getting rid of the non-compete is something we do during the severance negotiations and highly encourage you to think about that. Next item on the list is the time limits for signing the agreement or to revoke it. There are no rules on signing severance agreements.

Starting point is 00:14:20 You'll see this 21-day rule or this 45-day rule. That's about giving you notice. Oftentimes, the severance agreement is linked to some form of severance plan by the company, and they'll have to follow the rules there. But those rules, those time limits are negotiable. We usually ask for more time to negotiate, and the employer usually gives it. Once you sign the agreement, you have, and you're over the age of 40, you have seven days to revoke that agreement after you sign it. It's just, it's federal law. It's designed to have a second look at it. You might feel, you know, misgivings after signing the darn thing and you want to do something and it permits you to do

Starting point is 00:14:58 that. So no rules other than the seven-day revocation rule, which is driven by statute, but no rules in terms of how long you have to sign it for, even though these agreements say 21 days, et cetera, to sign them. The next item is no right to re-implement. This means that when you sign the release, the employer doesn't want you back. Makes sense because you probably create a stink in your way out because you create a narrative, a notice of claims, and a lot of anxiety from the employer, they don't want you back. So if you go that route, don't expect the employer to feel the love for you after the fact because it's not going to be there. The final issue or the eighth issue here is severance plans at ERISA. Again, people often say that they have heard about other people getting fired and they got

Starting point is 00:15:41 severance and two weeks per year of service or whatever. It's really two issues. Either the company has some type of policy, not a plan, but a policy that what they do and they just treat everybody whatever they want to. And the other version is having actual severance plan, a plan that they filed with the United States Department of Labor in Washington. And that's called an ERISA severance plan. And that has rules to it, namely your years of service equates to the amount you're going ERISA severance plan. And that has rules to it. Namely, your years of service equates to the amount you're going to get for severance benefits, probably anywhere from 26 weeks and below, usually a cap. But when you're dealing with claims of, let's say, age discrimination on top of severance or severance plan benefit, the age discrimination claim itself will be an additional

Starting point is 00:16:26 financial factor put into the severance arrangement negotiation to enhance what you're, let's say, you're offered 26 weeks into the plan, you got to sign a release to get it, but then you have this discrimination claim, you're going to use the claim to put more money on the table, employer doesn't like it, but they have to do it if they want to avoid litigation. So as an ERISA attorney myself, the aspects of ERISA are straightforward for me to explain to the client. Essentially, we're going to identify whether the severance being offered is part of a severance plan or not, or just policy, and tell the client that and negotiate accordingly. The ninth item on my list that I'm working on is mutual release of claims. And when you get divorced, you want to do it completely.

Starting point is 00:17:11 And you want to do it by both sides. The employer fires you, you fire them, you release them, they release you. And it's really important not to have any hangover effect whereby the employer can come back after the fact. Some employers, a minute share of them will attempt to put in language in the agreement to stop or to prevent or protect the right for the employer to sue you after the fact for claims, let's say criminality or embezzlement. Things they just couldn't uncover because you're so good at your job, you covered it up and they couldn't see it. I'm just kidding. Normally you shouldn't be doing embezzlement and stuff like that. But that's what they fear.

Starting point is 00:17:53 And it's oftentimes I'll ask the question of the client, is there anything that's keeping you awake at night that you're really, really concerned about that you did at your job? And clients do come clean. Typically they say there's nothing to really be concerned about that you did at your job. And clients do come clean. And typically, they say there's nothing to really be concerned about being sued. There are those notable cases in my memory bank of thousands of cases I've dealt with where I did have that issue come up, embezzlement or something or fraud. And so mutual release of claims from both parties, clean break, everybody wants that, and typically it's pretty easy to accomplish.

Starting point is 00:18:27 And then the last item is the issue of, you know, if you don't get a settlement, you have litigation. And it's really the cornerstone of what we do in our office is to promote settlements for both parties kind of an objective, neutral way. Even though we're the advocate, even though we're creating this powerful narrative on the employer, we do want the employer and the employee to resolve because the alternative is costly. It's more difficult down the road to begin to negotiate settlement because people get hunkered down in their positions. And it takes usually a court involved mediation session to help the parties out of it. But roughly about 80% of the time, the cases were resolving without litigation, which is great. It helps everybody concerned, employers and employees.

Starting point is 00:19:14 And about 20% of the time, you have employers who have maybe counterclaims or they have a negotiation policy to bleed you out,, expend your money on legal fees to the point where you just cry uncle and give up. That's kind of an older school type of approach. Still does happen, but we know and we see it early on because our process, you know, usually draws that out. So in summary, you know, you want to take severance negotiations very seriously and also objectively speaking. I came to this conclusion the other day that, you know, severance negotiation is a luxury. And if you have the financial means to afford it, it can have huge payoffs. Now, you've got to have claims to do so to support those higher amounts in severance.

Starting point is 00:20:00 But it is a luxury. Please, eyes wide open before you do this and hire some attorney. but it is a luxury. Please, eyes wide open before you do this and hire some attorney. Don't hire the attorney and think that they're just going to magically wave a wand and severance shows up. You've got to work with us to develop it,

Starting point is 00:20:13 but you also have to put the money up to deal with it. And we don't give estimates on our retainer agreements because we can't predict the future, but walk in knowing that if you're asking for 2X of your salary and it's a quarter million dollars, you got to be reasonable with yourself that you're going to experience some legal fees for the attorneys to investigate, open up your fact pattern, look at what's there and advise you. So let's just be reasonable about that. Okay. So when you hire the attorney,

Starting point is 00:20:42 it's an investment. It's a luxury. You don't have to do it. You can take what they want or the employer's offering and be done with it. Just do your study before you start this process. It's all going to happen like a train wreck all at one time. You're going to be on a lot of stress. But just ground yourself. Read an article on our website. In this case, I'm reading from an article, How to Negotiate Severance Agreements, a blog that was done many years ago, but still holds true today.

Starting point is 00:21:08 But read up. Other than that, thank you for listening to the podcast today. If you have any questions, give us a call at Gary & Associates. We're on the web, and you can find us, and we'll talk to you right away. Thank you.

Employee Survival Guide® - How to Negotiate a Severance Package With Your Employer

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