Labor laws usually do not require any severance package or severance agreements for employees. Those who are terminated for cause or at-will or low-level employees have less opportunities for receiving severance. There are several recommendations for negotiating a better agreement, according to the AARP.
Employees in legally-protected categories, such as those over age 40 or people with a disability, need to carefully review the fine print of any agreement they sign. These workers may be offered a package in return for waiving any right to file a lawsuit if they lose their job. Contracts may also put employees at a disadvantage by containing non-compete clauses in exchange for pay and benefits.
Negotiations should take place before an agreement is signed. When an agreement is presented, an employee should take the time to carefully review it and seek changes, if warranted. Having an offer rejected may be the worst that happens. Employees who are being terminated usually have 21 days to review and accept an agreement, while employees have 45 days if they are part of a group termination.
Severance may be paid out over time instead of in a lump sum payment to manage employee cash flow and expenses. Employers may be asked to pay health-related costs or continued coverage under their health insurance plan or payment of COBRA costs. Other options include allowing the employee to keep their work phone or laptop or converting life and disability insurance to individual policies.
Employers may also agree to pay for unused vacation time, accrued sick leave, bonus and commission payouts and out-of-pocket expenses paid by the employee. Vested and accrued interests in pension, profit and 401(k) plans should also be accounted for. When working relationships still exist, a worker may continue to receive compensation as an independent contractor.
An attorney can help negotiate and review these documents. They may help recommend terms and pursue an employee’s legal rights.