• Marc Kroop

Evaluating Your Options With Regard To An Offer Of Severance Pay From Your Employer

Generally, severance or separation pay upon termination of your employment is not required unless you are guaranteed the payment of severance by your employer pursuant to a contract that requires the payment of severance. In some cases, severance pay can also become contractual in nature based upon your agreement to remain employed through a specific time in the future to help the company through a transitional period such as a "change in control," after the sale of the company. Also, under certain narrow circumstances, separation pay may be required when there is a "plant closure."


When you have been informed of your impending layoff or suddenly terminated from your job and you are presented with a severance or separation package from your employer, you have several options. First you can accept the terms of the severance agreement,"as is," and move on. Alternatively, you can attempt to negotiate a higher severance amount or better benefits under the agreement. Finally, you may choose to immediately file a lawsuit and proceed in court and contest the reasons for your separation or termination.


The first option of accepting the severance package "as is" may be the path of least resistance and may be a decent option for you depending on your circumstances. This is especially true if you have another immediate employment opportunity in which you will earn the same or higher salary and benefits.


In other cases, severance packages are offered as part of an "early retirement" program set forth by the company. These retirement packages can provide generous separation terms to employees that may be contemplating retirement.


In other situations, you may be separated from your employment pursuant to a bona fide layoff that the company has implemented because of financial reasons. Your acceptance of the terms of a severance package offered under this circumstance may make the most sense to you due to your knowledge of your company's worsening financial condition or potential closure of operations at some point in the near future.


However, if you believe that the severance package offered to you is part some scheme to unfairly or unlawfully terminate you from your employment, then, the better option may be to negotiate for additional money or benefits. For instance, if you have been denied payment of a salary, bonus or commission, the amount of which far exceeds the amount of the severance package offered, or you believe that the timing of the separation is retaliatory because of a recent request you made for medical leave or because of some other complaints you made of wrongdoing by the company, then your acceptance of the offered severance package may be shortsighted. In such a case, you could choose to reject the offer of severance and negotiate a better deal.


In a case where you believe the better option is to negotiate an increased severance payment, you will almost certainly require counsel to lay out substantial legal claim(s) as a basis to negotiate for increased severance pay. Mainly, in arguing for increased severance pay, you will likely be accusing the person(s) responsible for making the decision to terminate you of acting in a fraudulent, discriminatory or retaliatory manner. The individuals that you are accusing of such misconduct may include your supervisor, a higher level manager, the company's human resources manager, the company's counsel or even the owner of the company. None of these individuals will ever voluntarily agree that they engaged in fraud, discrimination or retaliation. All of these individuals will be represented by the company's chosen counsel whose sole obligation is to negotiate the best deal for the company.


Significantly, the individuals you are accusing of misconduct may also be responsible for making a decision to pay any additional money to you in the negotiation. Your having experienced counsel to negotiate on your behalf can act as a buffer between you and the individuals you are accusing of misconduct while at the same time help you to determine the value of your claim and maximize the result.


Finally, you may choose to forego negotiations and proceed to immediately file a lawsuit. This is not our usual recommended course of action. However, in certain types of cases, we have had a great deal of success pursuing this course of action. The cases where we will consider the immediate filing of claims in court, include claims for unpaid wages, unpaid commissions or unpaid bonuses.


Usually, this last option entails more risk (court costs, increased attorneys fees, increased time and stress) for our clients. However, implementing this option can be advantageous where the employer has refused to pay wages owed and liability is clear. The reason we may recommend a lawsuit as the better option in this situation, is that an employer that refuses to pay its employee(s) and then offers a small severance package is also very likely to ignore our attempt to discuss those owed wages and engage in good faith negotiations to resolve the matter.


Our taking immediate action in wage claims has been successful for a few reasons. First, the individual who is responsible for the non-payment of wages may be personally responsible for the unpaid wages in the lawsuit along with the company. Any company that is incorporated, must have counsel in a lawsuit and must pay its counsel to defend the case on its behalf. The company is similarly responsible for defending the individual who made the decision not to pay you. A company that is trying to save money by not paying your salary, commission or bonus will have substantially increased litigation costs due to the naming of multiple defendants in the case. These costs will negate any savings by the company based upon its refusal to pay you money you are owed.


Also, the risk to the employer in a wage claim is great. If you prevail in your wage claim, the company will owe you the amount of wages due, penalties, interest, your attorneys fees and your costs. Even a small wage claim, can result in hundreds of thousands of dollars in liability for the company, if the company refuses to pay your earned wages. For those reasons, a lawsuit that is filed immediately against an employer that fails to pay wages can often lead to immediate successful results.


If you have questions about your severance package and believe that you have been unfairly denied wages or terminated, we are available to meet with you and discuss your options. We have successfully negotiated hundreds of severance packages for our clients and we can help negotiate the best result for you. To find out about more about your rights with regard to severance pay, contact Kroop Labor Law's managing attorney, Marc G. Kroop, at (925) 989-8264. We have two office locations in the Bay Area. Our East Bay (main) office is located at 2950 Buskirk Avenue, Suite 300, Walnut Creek, CA 94597. Our San Francisco office is located at 100 Pine Street, Suite 1250, San Francisco, CA 94111. The is no charge for the initial consultation.






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