Friday, February 13, 2015

Secrets to Severance Negotiations Revealed: A Philadelphia Employment Lawyer's Guide to Severance Laws and Strategies

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Philadelphia area employment lawyer John A. Gallagher represents Pennsylvania employees located in towns such as Philadelphia, Rosemont, Narberth, Levittown, Limerick, Gulph Mills, Swarthmore, Bristol and Broomall sue for Unpaid Overtime.

Wondering About Severance and Pennsylvania Unemployment? Click Here.

NOTE:  This Article was initially posted in one piece. Realizing it was far too long, I have broken it into 2 parts.

This part discusses what I refer to as "mandatory" severance offers.  Click Here to jump to the second part, which discusses what I refer to as "voluntary" severance offers.

Understanding and Negotiating Severance - Key Things to Bear in Mind Concerning Your Rights When Offered Severance

In general, there are two types of severance packages: Those that are required under the law, a contract or a company policy, and those that are made voluntarily for any one of a number of reasons.

Is Your Severance a Product of Good Will or Legal Obligation?
When considering a severance package that has been offered to you, the first thing you need to do is determine whether the offer was voluntary or mandatory.  Once you have that figured out, there are multitude of considerations that must be weighed in the course of deciding whether to accept, reject and/or attempt to negotiate the severance package offered to you.

This Post, while certainly not exhaustive, addresses the most common scenarios, approaches and considerations that I have learned about mandatory severance since I started practicing law in 1991.

Why it is Important to Understand the Employment "At-Will" Principle When Considering a Severance Offer

Most Americans are employed "at-will."  That means they have no right to any sort of "due process" in connection with any decision made by the company to terminate their employment.  If you are "at will," your severance offer is most likely voluntary.

However, certain employees, who are not employed purely "at will," have a right to severance under certain circumstances.  In such cases, the company may be required to offer severance.


What Kind of Workers Are Not Employed "At Will"?

There are some well-defined exceptions to the "at will" principle; if you fall into any of these, the severance offer is likely mandatory.

Mr. Hoffa Was Not a Fan of the At Will Doctrine
Union Members: Union members may only be fired in accordance with the rules stated in their collective bargaining agreement.

Certain Employees of State and Federal Governments: Many state and federal employees are deemed to have a "property right" to continued employment, and thus can only be fired if the governmental employer has followed well-defined pre-termination protocols (i.e. progressive discipline accompanied by an informal hearing) and has demonstrated "good cause" for the termination decision.

Do You Have a Written Contract
Promising Severance?
Employees With "Official" Contracts: Some employees, who are usually in the upper echelon of their profession, have contracts providing they can be terminated only under certain specified conditions.  For example, Chip Kelly has a 5-year contract, under which he is guaranteed employment for 5 years, unless he does something really bad (i.e. is fired "for cause").

Employees falling within any of the above categories often have a defined right to a specific amount of severance, provided they do not quit and/or are not fired "for cause."  This would be spelled out in your Union contract, or in the government's handbook or in the actual written contract between you and the company.

So, for example, someone subjected to a layoff by a Union of the government will get X weeks/months/years' of severance pay per Y weeks/months/years' of services.

Few of US Have Guaranteed Contracts Like Chip!
Or, if the Eagles want to end their relationship with Chip Kelly before 5 years is up, they have to "buy him out" of his contract (i.e. pay him severances), unless they can prove he engaged in conduct warranting a "for cause" termination.

So, if you fall into any one of the above-categories, you should examine anything in writing that defines your right to severance in the course of considering whether to accept or attempt to negotiate the severance offer.

ERISA Plans=Complicated 

Employees covered by ERISA Plans.  In addition to the above-referenced
employee groups, there exists another segment of workers who have a right to severance (provided they do not quit and/or are not fired "for cause").

This segment is comprised of employees who work for large or well-endowed companies who have a benefit plan covered by the Employee Retirement Income Security Act ("ERISA").  If you are employed by a company with such a Plan, chances are you are entitled to severance if your job is terminated through no fault of your own.

For ERISA-covered employees, you will be able to determine your rights concerning severance by examining the company's benefit plan. Such plans are often referred to as "Retirement Plans," "Pension Plans" or "Benefit Plans," and are usually made available for review on the company's website. You may also have been provided a "Summary Plan Description" ("SPD"), which provides highlights concerning your right to pension, medical benefits, severance, etc.

NOTE:  Many times, employees are unaware of the existence of an ERISA Plan, much less the terms thereof. This can really become a problem if, in connection with termination, the employee is locked out" of the company's computer system, making retrieval of the necessary documents impossible.  It is best to determine while employed whether you are the beneficiary of such a Plan, and to download all available documentation relating thereto while employed.

So, if you are a participant in an ERISA Plan, you should examine the SPD and Plan documents in the course of considering whether to accept or attempt to negotiate the severance offer.  Bear in mind, though, that ERISA is among the most complicated laws in all the land, so seeking legal advice to assist in your understanding is often necessary/desirable.

May Be Required Reading
Employees of Companies With Written severance Plans Found in Handbooks or Company Policy Manuals.  There is one more common situation in which severance is required.  That is where the company has a written policy, usually included within the Employee Handbook, that specifies under which situations severance will be paid, and the amount of severance provided to qualified employees.

Once again, if your employer has such a written policy, you would be well-served to read and understand it in the course of contemplating the severance offer on the table.

NOTE:  As explained in my NOTE on ERISA Plans, above, you would be well-served to download all relevant company materials prior to termination.

Mandatory Severance Offers, What to Look For - the Release

If you fall into any of the categories I discussed above, there is a good chance that the company is offering you severance because it is required to do so.

In such cases, you will likely have to sign a "Release" in exchange for the severance; however, you should check any written documents regarding severance to see if, indeed, you are required to sign a Release in exchange for the severance payment.

Does Your Severance Offer Included Accrued Sick and Vacation Time?

Otherwise, the things to look for, where mandatory severance offers are concerned, is whether the company is paying to you everything else it is required to pay you, such as accrued but unused
vacation pay, unused sick time, expense reimbursements, vested commissions or bonuses, etc.

Is There a Separate Provision for Paying You
any Accrued but Unused Sick Time?

In this connection, I regret to say that employers have from time to time been known to "fold" such obligations into a severance offer, thereby reducing the true value of the severance even though, on its face, the severance offered appears to be in line with what is mandated in the severance policy.

Are You Being Denied Mandatory Severance Because the Employer Says 
You Were Fired for Cause?

= For cause
Any mandatory severance plan, policy or contract will include a caveat excluding employees who are fired "for cause."  In my experience, the term "for cause" is often ill-defined, and purposefully overbroad; this is done in order to give the company substantial leeway to deny severance payments.

Thus, for employees who fall into any of the above-categories, the most common area of dispute is when the employee is denied severance because the company takes the position that he/she was fired for cause.

And, I regret to inform, I have encountered many situations wherein an employer attempted to avoid its severance obligation by "manufacturing" a reason to terminate an employee that it had determined was no longer worth employing.

Pretext = Lie
Such terminations are often referred to as "pretextual."  Stated otherwise, in this context a pretextual firing exists when an employer makes up a "for cause" reason to fire an employee in an effort to avoid its obligation to pay severance.

When I see this situation arise, I will attempt to negotiate a resolution for the employee; failing that, I will without hesitation sue on a contingent fee basis if I believe the case has merit.

      Helping Pennsylvania Workers With Severance Issues Since 1991
Philadelphia Area Non-Compete Agreement Attorney Who Specializes in Representing Employees Negotiate Employment Contracts and Separation Agreements Containing a Release

John A. Gallagher is an employment lawyer who represents employees who need an employment lawyer in Southeastern Pennsylvania, including those working in Philadelphia County, Delaware County, Montgomery County, Bucks County, Chester County, Berks County and Lancaster County.

Looking for a Pennsylvania Lawyer to Help You Negotiate a Better Severance Package? We Offer Free Telephone Consultations and Contingent Fee Representation for negotiating an increase over your original severance offer where appropriate

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