Losing a job may terminate a worker's only source of income and important benefits, such as heath care. Some workers, especially those in senior positions, may be offered a severance package with continued payment of salary for a time, stock options, job-search assistance and other benefits. When employment contracts may not contain the terms of these packages, employers may offer severance agreements which contain employee benefits in return for the surrender of important rights.
The employer, for example, may seek a confidentiality agreement or non-competition agreement that prevents a worker from being employed by a competitor or within a certain geographic radius for a certain time. Other terms may stop an employee from taking legal action for wrongful termination or saying anything negative about their former employer.
Despite the fear and stress of sudden termination, an employee should not sign anything immediately. This is especially important if they are asked to give up any of their rights. In fact, the Older Workers Benefit Protection Act grants a 21-day review period of severance packages for workers over 40-years-old.
It is also important to gather information before negotiating a severance package. Knowledge may be power, especially if it concerns the relevant contents of any employment agreements or handbooks, packages offered to other similarly-situated employees, company policies and whether there are any grounds for a wrongful termination or discrimination lawsuit.
Employees may make a good-faith offer while pointing out their contributions to their employer and any extenuating circumstances such as relocation. They may also seek continued employment for a limited time to receive bonuses for assignments or eligibility for certain benefits.
Keep in mind that severance may impact eligibility for unemployment compensation or have tax liability. Employees should also be prepared to reject any offer if the compensation or benefits does not outweigh the rights that are lost or the potential harm to a worker's employment security.