Denied Severance Package – Do I Need An Employment Lawyer?

Author: Mesriani Law Group
Posted on: June 8, 2021

Employees are compelled to do great at work, some almost their entire lifetime, to achieve a better life and tranquil retirement. A severance or retirement package is only optional as no law requires an employer to give the employee one.

However, if from the start of your employment such benefit is included in your contract then you are more than entitled to claim it. Severance packages are normally offered to employees who are laid off due to downsizing or restructuring, or any related reason leading to the employer’s responsibility.

If your employer denies you this right, you have grounds for legal action since you were given the idea that you have one, either through a black and white contract, company mandate, or even oral promise that you’ve been offered a severance package.

What is Severance?

This is a financial offer that is made up of cash given upfront along with some continuation of benefits for a specific period, such as medical and dental insurance. A typical cash offer is one week of pay for each year of service or in some generous package they might offer up to a month’s pay for every year or on lump-sum payments. The longer the term of service, the higher offer for the package. However, it can also include:

I. A stock option statement with an exercise schedule

This is related to the ESOs (employee stock options) which are a type of equity compensation granted by companies to their employees and executives.

II. Commissions, deferred compensation, and bonuses

A commission is a sum of money paid to an employee as additional compensation that’s earned based on job performance.

A deferred compensation is a portion of the salary of the employee that is set aside to be paid at a later date.

A bonus is a form of payment outside of an employee’s base pay and is usually given as a reward for a specific behavior or a specific purpose.

III. Loan repayment terms

These are loans provided by the employer to its employees to repay through payroll deductions that shouldn’t reduce their wages below the $7.25 per hour federal minimum wage.

IV. Restricted stock and accelerated vesting

Restricted stock is the unrecorded shares of proprietorship in a corporation that is presented to corporate affiliates, such as executives and directors.

Accelerated vesting permits the employee to hasten the schedule to gain access to the restricted company stock or stock options issued as an incentive.

V. Rights from a pension, 401(k), or profit-sharing

The 401(k) is a tax-qualified plan in which employees can choose to have a portion of their pay contributed to the plan on a pre-tax or after-tax Roth basis. This plan is intended to help employees meet long-term objectives, such as generating retirement income.

VI. Unreimbursed business expenses

Are expenses that the employee has to pay for from his/her pocket for the completion of the job or task, which the employer has not paid back or given an allowance for. This includes but not limited to, paying business liability premiums, professional dues, educator expenses, and the cost of passport required for a business trip.

Who is Entitled to a Severance Package?

Severance packages are not limited to be offered to full-time or permanent employees only. Those who work part-time or temporary can also negotiate for a severance package especially when the employer is more than willing to provide additional benefits that you seek based on your contribution to the success of the business. This agreement is usually agreed upon right before the employee accepts the job or is offered at the end of the employee’s work contract.

What are the Severance Package Policies?

Employers should establish guidelines concerning severance package to each of their employees to provide necessary information of the package’s coverage and to serve as insurance of the employer from lawsuits based on claims of unfair business practices. A formal policy commonly discusses the following:

I. Purpose

The employer will present the value of the severance plan, which is generally to assist employees while they seek other employment.

II. Conditions

The severance policy will lay forward the circumstances the employee will be paid and will not be paid severance.

III. Groups covered by the policy

At times the employer will limit the policy to a definite class of workers. For example, regular workers that receive monthly salary may receive severance, but employees who work in an hourly basis will not.

IV. How severance pay is calculated

The policy will set guidelines for how the employees will be paid based on their term of service, payroll system, and the like. Along with how to pay for things such as unused vacation leaves, sick leaves, and so on.

V. How severance is paid

Severance is paid either on a lump sum or regular pay periods for a specific duration. The payment scheme may influence the payout of unemployment benefits, depending on your state.

VI. Documents to sign

Employees may be required to sign documents, such as a legal release, hold harmless agreement, and the like, before releasing the severance pay.

VII. Employer’s right to modify the severance package

The severance package will likely provide certain protection for the employer giving them the exclusive right to change or terminate the severance policy. Also, the policy may specify that if the company or business is sold, acquired, merges, and so on, then unless the employee is involuntarily terminated the severance will not be paid.

How do you Work Out a Deal for Severance Package?

The severance package given to you by the employer is just an offer and you don’t need to accept it as is and immediately. At all times, the first thing to do is read the details of the severance package before you agree and sign anything. A review period of a week to 21 days or more is the common offer for the severance package to be signed.

To better guarantee that you get the best compensation and benefits you deserve, work with an employment lawyer with thorough experience in negotiating severance packages. The seasoned and accomplished labor lawyers from Mesriani Law Group can ensure that you get the suitable severance package you fairly deserve from your employer.