After the Pink Slip

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Posted by Rachel Wong on June 16, 2011
After the Pink Slip

You've just been laid off and received a severance package-some money, and maybe other terms such as continuing health care or 401(k) benefits or outplacement services-and possibly a separation agreement to sign before the company will agree to give you severance. How should you react to this offer?

Step 1: Evaluate What Leverage You Have

Your bargaining power will depend the state of the company's finances and your particular relationship with the company. According to Dan Newland, a defense attorney from the San Francisco office of Seyfarth Shaw, even in cases where you have done absolutely nothing wrong, if your company has run out of money and undergone mass layoffs, it may have little to offer its departing employees. He argues that if you are a mid-level employee involved in a large-scale layoff that you believe the company has conducted legally and fairly, it may be wise to simply sign any separation agreements and accept severance graciously.

On the other hand, you may find yourself in a situation where you do have leverage:

You feel you might have a claim against the company and the severance does not reflect the value of the claim you're being asked to waive, especially if you fall into certain "protected categories" due to your age, gender, or ethnicity. Newland points out that companies absolutely want to avoid getting involved in legal cases that take time, energy, and resources, and may find it worthwhile to negotiate a severance agreement that will allow them to avoid being sued and to avoid the negative publicity that may ensue.

You have some key skill or confidential company knowledge that needs to be transitioned to someone else. As David Lowe, an attorney at Rudy, Exelrod & Zieff, LLP, in San Francisco, explains, if an employer needs you to stick around for a limited time to finalize certain projects or transfer information, it may be compelled to provide you with ample incentive to stay.

You are a departing senior executive with a close relationship with the employer. Newland says that people at higher levels in their company are more likely to have employment agreements that make their severance more open to negotiation. Such employees also are normally equipped to hire lawyers to carry out the process.

Step 2: Consult Lawyers if Necessary

It is certainly not always necessary to consult a lawyer, but it may be appropriate if you would like a lawyer's help in evaluating your leverage before signing a severance agreement that waives certain rights. And if you suspect that the company has not complied with the law or you feel you may have claims against them, it makes sense to consult a lawyer before signing a document that waives your right to any claims.

You may also want to act on this option because, as David Pogrel, an attorney at the Legal Aid Society in San Francisco, points out, "It's good [to consult a lawyer] because it may happen that your rights have been violated, but you simply don't know."

To find a lawyer, you can contact the National Employment Lawyers Association (NELA), your local bar association, or even the phone book. Legal advice can cost between $125 and $300 per hour. In certain cases, you may qualify for some free services at various legal aid organizations, such as San Francisco's Legal Aid Society. And if you feel that your employer has violated anti-discrimination law, you could contact the Federal Equal Employment Opportunity Commission.

Step 3: Decide Whether You Want to Negotiate

It's your choice whether to negotiate or not, and you certainly should not feel obligated to do so. It may be that you find your severance package fair given the company's situation and your leverage within it.

Some severance packages may even come as a pleasant surprise. When the San Francisco-based 1stup.com went under, for instance, Human Resources representatives followed the procedures of the Federal Worker Adjustment and Retraining Notification Act (WARN), giving employees 60 days of pay and benefits from the time they were notified of the shutdown. Explains Laurel Leichter, 1stup.com's HR manager at the time, "People actually for the most part were okay with it. It's pretty unusual to get that sort of notice."

As Lowe points out, especially if you do not have much leverage, "It would be absurd to object to a good severance offer."

Still, you always have the right to ask for severance or negotiate the offer, especially if you have sufficient leverage. As Lowe says, as far as negotiating goes, "Certainly, sometimes, the employer's willing to negotiate a little bit."

Step 4: Approach Your Employer with a Fair Request

The rule of thumb for the average laid-off employee is to negotiate in a reasonable manner, providing rationale for various requests. Here are some possible requests that Newland argues may be appropriate, depending on the circumstances:

More severance pay. You might argue that you were recruited by the company, that you were in good standing, and/or that you made certain specific contributions to the company. If you have met with a headhunter, you could argue that the time the headhunter says it may take for you to find a comparable job is longer than the weeks of severance you've been offered and that you'd like to bridge the gap more sufficiently.

More time. If you are working on a project that is nearly completed, Newland argues, you could make a case for why staying to complete the project could be extremely helpful to the welfare of the company. It may also be possible to buy yourself more time at a company if you explain that staying a week or two would be very helpful for you-such as if there are only two more weeks in your lease and you plan to move afterward.

Personalized benefits. Newland explains that when employers develop severance packages, they are "trying to figure . . . the priorities" of employees. For example, a single mother might be more interested in extended health benefits than a healthy, 20-something dot-com employee. Or maybe you relocated for your job, and are inclined to return to the location you moved from now that you're being laid off. Don't be afraid to negotiate for what you need; for example, in the second case, you might try to negotiate some moving expenses as part of your severance package. And realize that you'll be especially likely to succeed if you offer the company a trade-off of some kind; for example, the single mother might negotiate better health care terms in exchange for less cash.

Be careful not to set your sights too high, especially if you're a part of a group layoff that has given relatively consistent packages across the board. According to Newland, "Is there an opportunity to receive some incremental gain? Perhaps. Is it likely that someone is going to dramatically enhance the package that you've been given? That's very unlikely."

Also, at times employees will insist that the severance is simply not negotiable. For example, one woman recently laid off from an Internet professional services company says that when she tried negotiating with her boss, he said, "Sorry, I can't do anything for you." Since in most cases you do not have a legal right to severance, if you do not have sufficient leverage you may have to accept this.

Step 5: Come to an Acceptable Resolution

In the end, if you have been offered severance without having to sign an agreement, you will probably have to settle at some point for what they will give you. If the severance is only granted after you sign an agreement, you will have to decide which is more valuable, the severance cash and benefits or your right to certain employment claims. Choose well, but be as swift as possible. Why? For one thing, many agreements can only be considered for a specific amount of time. For another, the employer has the legal right to rescind any offer it makes up until it is signed by both parties. And finally-and maybe most importantly-getting the details of your layoff behind you will free you to move on to new things, both in terms of time and emotional energy.


 Rachel Wong is a writer living in San Francisco.

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