Severance Packages Should Be Closely Reviewed

As the country continues to slog
through a tough economy, there are still companies choosing to
downsize and many of those companies offer severance packages as a
matter of policy.

When an employee is let go and the
company offers a severance package, there are a few things to
remember about the process that could have an effect on that
employee’s ability to move on to the next job.

Companies are not required to offer
severance packages. About 60 percent of businesses in the United
States have a formal severance plan policy.

Those policies are written to provide a
soft landing for the exiting employee and legal protection for the
company. In many instances, a severance package is the easiest way
for a company to let people go quickly and quietly. Many companies
require exiting employees to sign legal paperwork promising they will
not sue the company for discrimination.

Attorneys suggest having a consultation
before signing severance package paperwork. If there are any reasons
an exiting employee may have to claim a discrimination suit against
the company, the opportunity is lost once the paperwork is signed.

Company severance policies will outline
who is eligible – salaried employees, hourly employees, contract
workers, and more. The policy also likely explains the circumstances
under which a severance is offered – involuntary reductions in
staff – and what needs to happen for a severance to be withheld
such as termination for cause.

The company policy likely will cover
how the severance will be calculated – often a factor of length of
service. And the company will have rules about what type of legal
paperwork the exiting employee will be required to sign.

Severance package legal paperwork may
also include non-compete clauses that could limit an employee’s
ability to seek out a similar job in a similar industry.

Most corporate severance packages
include some negotiable elements and exiting employees can sometimes
get a better deal in the right circumstances. Compensation elements
that can be negotiable include pay, unused paid time off and

All companies’ severance packages
differ depending on the type of employee. For some employees, the
offer will be two weeks salary. For higher-level employees it could
be six months or a year’s salary. Many companies calculate an offer
based on the length of service and level of employee.

Paid time off can be negotiable in some
cases. If an employee has unused PTO and/or sick days, then a company
may be willing to factor that into an offer. Occasionally, state law
can require companies to pay for unused PTO.

Lastly, companies sometimes will
require an exiting employee to waive the right to collect
unemployment compensation benefits. There are many details in a
severance package that should be carefully looked at it by an
experienced employment attorney before signing.

Seth Wilburn writes for the Gomez Law
Group, a Dallas employment lawyer and Dallas business lawyer. Dallas
business attorney Ty Gomez has experience reviewing severance
packages for employees and severance policies for companies.

To learn more, visit

Seth Wilburn writes for the Gomez Law
Group, a <a href=””>Dallas
employment lawyer</a> and <a
href=””>Dallas business
lawyer</a>. To learn more, visit


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