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Severance Pay: How to Evaluate the Offer

The essential bargain of a severance package is this: you give up your right to assert claims and your employer will pay you some money and maybe give you a few other things.  There is some information available about what employers offer on average in severance, but the most important question is usually about the scope of your potential claims.

For most people, this is like considering an offer to purchase something when you have no idea what its value is. Is $5,000 too much for a painting? How could you know that without some input from someone with expertise in the actual value of the painting? If it is a Picasso, $5,000 may be a steal, unless perhaps it is signed by Picasso but is known to be a studio piece made by an apprentice and just stamped with Picasso's signature...and how would you ever know if that was the case? If you follow the analogy far enough, you will find the list of things you don't know without an expert only increases.

This is why you should have an employment lawyer review your severance agreement before you make a decision. Below are some of the things you and your lawyer should be considering.

Does the Severance Agreement Require You to Release Valid Legal Claims?

If you are asked to sign a severance agreement, you will almost certainly be asked to sign a release of claims. This means it is critical for you to understand whether you have any potential claims arising from your employment, and what those claims might be worth.

If you are a member of a protected class under state and federal discrimination laws, you should discuss with a lawyer whether your termination might have been the result of discrimination.

If you have recently taken a medical leave, disclosed a disability, or reported discrimination or harassment in the workplace, you should discuss with a lawyer whether you might have a retaliation claim.

If you have an employment contract that limits your employer's ability to terminate the employment relationship, you should review that with your lawyer as well.

Is the Severance Pay Worth more Than Your Potential Legal Claims?

The answer to this question depends on two things: the damages you would likely recover if you brought your claims and won, and the likelihood that you will succeed on those claims. Both of these questions are a little bit speculative at this stage, but there are some things that can help you and your lawyer get a reasonable sense of the value of your claims.

Damages. Generally, the damages you can recover for a wrongful termination claim are your lost wages from the time of termination to the time of judgment, attorneys' fees, and sometimes emotional distress damages. In extreme situations, depending on the claim, you might be able to recover punitive damages. Your lost wages are always offset by replacement income, including income from a new job when you find one and any unemployment compensation you receive.

In thinking about the value of your claim, you and your lawyer should try to predict how long it will take to find a new job. If you expect to be able to start working again within six months and collect unemployment for that period of time, your actual damages may be smaller than you think.

Chances of Winning.  The likelihood of success will depend on may factors which you should discuss with your lawyer. Questions you may be asked include:

• If you believe you were discriminated against, were there specific statements or actions that you believe show discrimination? 
• Does your employer have some reason for the termination that, if a jury believed it, would be credible grounds for termination?
• How long have you worked for the employer?
• Is there any history of adverse actions toward other people who are in your class (race, gender, disability, etc.)?
• If you are over 40 years old and considering an age discrimination claim, you may have been given a breakdown of all employees laid off. This report is required by the Older Workers Benefit Protection Act. You and your lawyer should review to see if the effects of a layoff fell disproportionately on older workers.

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How We Can Help

If you are unsure whether you have valuable legal claims you would be giving up, concerned about the impact of re-confirming a non compete or other agreement, or simply need help understanding what your rights and obligations are under a severance agreement, we can help.  You can use the button below to schedule a call back from a member of our team, give us a call at  781-784-2322, or fill out our web form  to let us know a little more about your situation.

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