Tuesday, September 08, 2009

Severance: know your rights, and don't take it for granted (watch the "release of all claims")


In these "Strange Days", it’s well to review the subject of severance pay.

Typically, non-union employees are not necessarily entitled to severance pay, but in many states they may be able to claim it if the employer gave them a handbook stating a severance policy. Likewise, in some states, the “employment at will” rule may be waived if the handbook says otherwise.
Kalijarvi, Chuzi & Newman, P.C (link) provides a valuable link at findlw here, “Severance Pay and Benefits Considerations”,

Typically, employees are required to sign some agreements. Sometimes these can include non-competition clauses (which in a few cases have even overwritten retirement pensions, too). Typically, the employee has to sign a “release of all claims” – an agreement not to sue – to get full severance benefits (as if the full benefits were admittedly a kind of informal “out of court settlement”), which may be one to two weeks for every year of service. Some companies give associates over 55 additional weeks.

After a merger, the acquiring corporation typically agrees to the terms of the acquired company for a while if they were more generous, and then may cut them back. There have been problems when the acquired company had promised notice in advance of layoff and the acquiring company doesn’t want to honor it. However, an employee might have to waive this objection with a “release of all claims” to get the full benefits offered.

Often, it is to the associate’s advantage to accept the severance as a payroll check for as long as the severance lasts, so that health, dental and other benefits continue without having to pay COBRA. If the employee is over 55 or 60 or some age and has enough service, the employee in some companies might get retiree health benefits.

Nancy Trejos offered similar advice in her Sunday Sept 6 Washington Post column, “How to Negotiate a Severance Package” link here.

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