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The Lopez Law Group has skilled employment attorneys ready to help you negotiate the severance package you need
What is Severance Pay?
Severance is generally a monetary compensation paid out to a worker whose employment has been terminated or “severed.” Severance can occur when an employee is fired, laid off, or demoted without ample reason. However, severance upon firing is less common in Florida.
Severance packages can include other benefits on top of monetary compensation, such as extended health coverage, retirement accounts, and access to stock options. In some cases, terminated employees may be offered assistance in finding new employment.
Severance pay is sometimes based on employment length and often applies to long-term employees as a goodwill gesture or to recognize their service. Severance pay should include any paid time off (PTO), vacation pay, or sick leave an individual accrued during their employment.
The primary purpose of severance pay is to help an employee land on their feet while searching for new employment. However, severance packages can have ulterior motives. In some instances, severance agreements require an employee to sign away their right to sue their employer for any wrongdoing.
Receiving extra pay after a termination or demotion is enticing, but understand that in almost every case, you will have to make some sacrifice in return.
Severance Law in Florida
Florida does not have a law that requires employers to offer severance packages to employees upon termination. However, many employers choose to offer severance pay to quash any legal claims the employee may have or to impose a non-compete agreement upon the employee. Non-compete agreements prevent employees from working other jobs in direct competition with the employer.
Other employers choose to provide severance benefits as part of their general policy. If an employer decides to include severance benefits in employee contracts, the policy is enforceable by law, under the condition that the employee knowingly and voluntarily signed the severance agreement.
The federal Fair Labor Standards Act also has no severance pay requirement. Although employees are not guaranteed severance pay, they can apply for unemployment insurance if they were terminated for reasons unrelated to their work performance.
Negotiating a Severance Package
It is best to tread lightly when negotiating a severance package. Lengthy negotiations or unreasonable requests can lead to your employer inferring that you reject the severance package; they may even rescind the offer of severance outright.
Hiring an attorney to negotiate your severance package is advisable, but should you choose to negotiate the package yourself, there are several factors you should consider.
Negotiating Monetary Compensation
Naturally, the first item of business will be determining how much severance you ought to be paid. A common misconception is that employers offer one week’s pay for every year that the employee worked. Most employers offer at least two weeks’ severance pay, so you should not settle for anything less. For high paying positions such as executives or CEOs, severance pay can include a salary continuation of six to 12 months.
In some circumstances, such as a termination related to a change in control of the company, employees can negotiate higher severance pay. If you were terminated due to a merger or acquisition, you could argue for higher severance pay, but be aware that you may be subject to a 20% excise tax.
If you prefer, you can try to have the severance paid out in one lump sum rather than over an extended period. Requesting a lump sum is typical of employees with reason to believe their employer may not hold up their end of the bargain.
If your severance is paid out as a continuation of your salary, make sure it continues even in the case of death or disability. Make sure to incorporate a clause that allows no mitigation or clawbacks of severance pay into your severance package.
Sick Leave and Vacation Pay
Make sure your severance package includes any unpaid paid time off (PTO) or vacation pay you’ve accrued. Vacation pay is typically paid out on the last day of employment, but conditions vary based on the employer.
Employees are entitled to 18 months of continued medical and health benefits after termination, as enshrined in the Consolidated Omnibus Budget Reconciliation Act (COBRA). If the employee is disabled, they are entitled to remain on the company’s health plan for up to 29 months. Employees may request that death and disability benefits continue as well.
Unless otherwise stated in the severance agreement, the employee must pay the premiums to remain on the company’s health plan. Terminated employees may request that their employer pay the premiums. However, employer-paid medical coverage is taxable. Some employees prefer a lump sum equal to the medical benefits they would receive to side-step such taxes.
Executive employees are often entitled to stock options with their company. Stock options are vested slowly over time to encourage employees to remain at the company for several years.
If your employment ends before your stock options are fully vested, you can request the right to exercise the stock options awarded, including unvested stock options. You can request to exercise stock option rights immediately or over an extended period. You can also ask for the vesting of your stock options to be accelerated.
Wages in Lieu of Notice
If you were terminated without notice, you can attempt to negotiate pay for a notice period you feel you should have received. In Florida, employers are under no legal obligation to pay wages in place of notice but may choose to do so as a form of damage control.
If your employer requests certain behaviors on your behalf, you can request that the clauses be mutual. For example, a mutual general release clause ensures your employer releases you from any legal claims they may have against you and vice-versa.
You can also request that any disparagement clauses be made mutual. Suppose the severance package prohibits you from speaking negatively about the employer. In that case, you can ask that they be held to the same request to avoid any potential damage to your reputation.
If you fear that your employer sees you in a negative light, you can request that a neutral reference clause be added to your severance package. A neutral reference means that your former employer can only provide general information to potential employers, such as your employment dates and the nature of your position.
To ease the process, you can ask your employer to provide you with a reference letter stating your employment dates and role. This way, you can cut ties with the employer while still using them as a reference.
Resignation in Lieu of Termination
If you prefer, you can ask to resign rather than being terminated. Proceed with caution when considering resignation in place of termination. If you voluntarily resign, you may not be eligible for unemployment benefits. That said, the Department of Economic Opportunity generally allows resignation in lieu of termination to pass as involuntary termination.
If you were terminated, your company might offer to pay for an outplacement service to help you find new employment. If you feel you will need assistance finding a new job, ask your employer if outplacement is an option. You can also request a cash handout to hire an outplacement firm yourself. You may be able to receive between $10,000 and $25,000 if your company agrees to the proposal.
Protecting Your Rights During Severance Negotiations
A driving force behind employers offering severance packages is the potential to get employees to sign away rights. The commitments you make in a severance agreement can affect you for years to come. Make sure you are very clear on the terms of your negotiation and are not being taken advantage of to avoid trouble down the line.
Employers’ leading effort during severance negotiations is towards a general release of liability, which means that employees must sign away their rights to take legal action against a company for any complaints they harbor. The list of claims will be extensive and can include demands to drop complaints about discrimination, wrongful termination, and other workplace violations.
Employers often include non-disparagement agreements in their severance packages, and the conditions can be far-reaching. Disparagement can be any comment or remark that paints the employer in a bad light. Such an agreement would be easy to breach and could affect an employee for years after they’ve left a company.
Beware of vastly broad severance clauses as they are highly restrictive and affect how you go about finding new work. Signing exhaustive non-disparagement agreements can land you in hot water if you so much as criticize your former employer in a social media post or to another potential employer during an interview.
Another condition employers often weave into severance agreements is a non-compete covenant. If an employee signs a non-compete agreement, they are prohibited from working with the employer’s competitors for a designated time frame. A non-compete agreement is a big ask, so be sure you will receive adequate compensation before agreeing to such a demand.
Non-compete agreements usually last for six months to one year. The geographic scope is also taken into consideration. If you agree to a non-compete covenant, ask your employer to provide you a list of competitors to avoid unknowingly accepting employment with a conflicting company.
A non-compete agreement will restrict your options for new employment. Try to avoid non-compete agreements if possible. If your employer is adamant about a non-compete agreement, make sure you negotiate a set expiry date for the arrangement and as narrow a geographic scope as possible.
Knowing your rights is essential when it comes to termination from a job. Employers might behave vindictively if the termination occurred under adversarial circumstances. They may also try to cheat you out of the pay they owe you to try to cut costs. Although not unheard of, it is illegal for an employer to try to withhold pay for final weeks or hours worked until the employee has signed a release.
Benefits of Hiring an Attorney for a Severance Package
If you are unsure or uneasy about negotiating a severance package, consult an experienced employment attorney. They can advise you on appropriate steps and determine whether a severance offer is in your best interest.
If you believe you were wrongfully terminated, consult an attorney before signing any severance agreements. As mentioned, your employer may be trying to get you to sign away your rights to sue the company. If you sign such a release, it will be difficult or even impossible to reverse. If you believe you were terminated due to discrimination or retaliation, hold off on signing any releases or waivers.
Severance Package Advice
If you need help negotiating a severance package, contact the Lopez Law Group today. Severance packages are full of buried clauses and intentionally convoluted language that can dupe you into making unconscious agreements. Our team of experienced attorneys can help you negotiate a severance package that protects your rights and wishes. Call us at 727-933-0015 for a case review.
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