"Separation Agreement", or Spawn of the Devil??

Bob Balaban  March 10 2009 07:53:16 PM

Greetings, Geeks!

It's happened to me a couple of times, maybe it's happened to you too: You get "terminated" from your job (downsized, laid off, made redundant...). There are lots of names for it, but no matter what they call it, the situation totally sucks. Especially if it was a surprise (as it most often is).

Usually the "termination" conversation includes some explanation of what the company will "do for you". Sometimes there's "severance" pay (basically, they continue to pay your salary for some period of time while you start looking for another job), sometimes benefits continuation. Sometimes there's nothing (nada, zip, zilch, bupkis, gar nicht, zero, don't let the door hit you in the butt on your way out).

But maybe you have rights. Maybe that's not really the end of it. Maybe there's stuff you can negotiate.

I thought I'd summarize some of the things I've learned here and there, over the years, from my own experience and from that of my friends. However, in the spirit of full disclosure, some caveats:

   - I am NOT a lawyer, don't want to be, don't play one on TV
   - I am making every effort to be clear and accurate in this post, but I could be making unintentional mistakes
   - If you find yourself in this situation with questions, ASK A REAL LAWYER! It can be expensive ($300 per hour and up is common), but I gurarantee you, it will be worth it.
   - The laws governing employement, separation and contracts are different EVERYWHERE: state by state, and for sure country by country. I am not a scholar of them all, take what I say with a very large grain of salt
   - My observations are probably very US-centric. The EU has VERY different rules and regulations, as, probably, does the rest of the world

And another important caveat:

   - I am not referring here, either implicitly or explicitly to any company from which I may or may not have been separated, either voluntarily or involuntarily, at any time in the past, present or future. Got that?

So, one day you get a phone call or an office visit from your manager, and you find yourself jobless. Sometimes they give you time to "find another job in the company" (that's not uncommon for large companies, rather rare in smaller ones). My attitude about that is that it's a rather humane way to handle the situation, and (if your attitude about the company hasn't been poisoned by the job action), you should think about taking advantage of it. If you decide that you want OUT, by all means use the time to start a job search out in the wild. Either way, you'll want to update your resume/CV. I strongly suggest you find a friend or a relative or an outplacement consultant (sometimes provided for you for free by the company) to help you pull it together, check your spelling and grammar, etc.

Let's say, though, that at some point you're really out. You probably get some kind of "exit interview", and you probably are given a "separation agreement", which they'll ask you to sign. DO NOT SIGN IT RIGHT AWAY!!!!!!!! In the United States, by Federal law, you have 21 days to decide to accept or reject this agreement, or to negotiate for changes. You don't have to sign it immediately, regardless of what they tell you. If you are over (i think, again CONSULT A LAWYER IF YOU HAVE QUESTIONS) 45, you have longer to make up your mind.

So, chill. Think about the paper and study it carefully, What are they asking you to agree to, and what are they offering you in compensation for said agreement?

Of course every company will have their own version of this document. Some are reasonable and fair, many are one-sided (not in your favor) and unreasonable. YOU get to decide which category you think the "agreement" falls into. Read it CAREFULLY. There are many implications and commitments, both express and implied in the document. You need to understand them all. Some common provisions I've encountered go like this:

   1. You agree not to sue the company for wrongful termination, or, basically, anything else that might have happened in the past. This is the "release" part of the document. If you sign it, and later discover that you were the victim of (for example) age discrimination (VERY illegal in the US), it might be too late for you to do anything about it. Consider carefully! Generally this provision is not mutual. I.e., you agree not to sue them, but they usually won't offer not to sue you. NEGOTIATE! Ask for the provision to be mutual. What have you got to lose?

   2. They bribe you. This is the part where they offer you some money to sign the agreement. They WANT your promise that you won't sue them for anything, and they are willing to pay (something) for it. The amount varies. It might be based on length of service, it might be N weeks of salary (and they'll withhold taxes and other stuff, just like in a normal paycheck), or maybe a lump sum. Note Well: this is not the same as "severance", where they continue your salary while you try to find another job. The difference is IMPORTANT for things like unemployment benefits. If you should apply for unemployment (and why not?), you are (in most states, but of course it can vary, so DOUBLE CHECK) required to report severance pay and any other income you may get, and this will probably reduce your payment from your state. The money promised in exchange for the "release" may NOT count as "income" for unemployment purposes (DOUBLE CHECK IT!). If you think the amount they're offering you is unfair, then SAY SO, and ask for more. What are they going to do, fire you?

   3. NEGOTIATE, if you feel like it. Sometimes a company will agree to continue your medical bennies, or life insurance for some amount of time after "separation". That can be worth a lot of money to you.

   4. If you've got accumulated vacation time when you get "terminated", they owe you that RIGHT AWAY, again by Federal law (in the US). While the separation payment discussed above is generally contingent on you signing the separation agreement (you no sign, they no pay), by law they OWE you the money for your accumulated vacation time, and they're supposed to give it to you on your last day of work. They can NOT hold that over your head to try to get you to sign the agreement.

   5. The agreement will probably reiterate a confidentiality provision that you probably already signed (often when you started working for them). Get a copy of the "employment agreement" that you probably signed when you took the job, and you thought you'd be there forever, and that everything would be great and nothing bad would ever happen. Most likely, there's language in there that binds you to those provisions after you no longer work there. There is likely nothing you can do about that (but DOUBLE CHECK with a lawyer if you have questions). Other provisions that you may still be required to observe: non-compete (this is now illegal in some states, and will be in more over the next couple of years, but if you signed it, and if it was legal at the time you did, then you have to at least worry that if you violate it, they can sue you); non-disparagement (you agree not to say or write anything nasty about your soon-to-be former company). This last one is particularly insidious, IMHO. There is no reason (again, IMHO, but the company may or may not agree) that this provision should not be mutual. If you agree to only say nice things about them (or nothing), shouldn't they agree to not say nasty things about you? I would think so. NEGOTIATE! Of course, certain kinds of nasty sayings/writings done in public can violate the libel and/or slander laws, so BE CAREFUL!

The non-compete clauses are particularly evil, IMHO. They can drastically limit the range of places you can try to get a new job. The language in the separation agreement is probably very vague about what companies you can or can't go to work for, and what constitutes "competitive activity". How do you know? The real (legal) answer is that you don't. The one who gets to decide is a judge, and you may have to spend a lot of money before you get to tell a judge your side of the story. Companies suing former employees based on a non-compete agreement is rare, but it happens. Some companies may ask to see your former companies' non-compete provisions, and may even decline to employ you based on it, because their lawyers are fraidy-cats. Probably not much you can do about that, except maybe refuse to agree to a non-compete next time.

Note that non-compete clauses, whether they exist in your employee agreement (what you probably signed when you started work and everything was rosy) or your separation agreement, are completely separate from confidentiality promises. You still can't take secrets or intellectual property that you may know about from your now-former job, and give/reveal them to your next employer.

    6. Governing law. There may, or may not, be a paragraph in the separation agreement specifying the state or other jurisdiction under whose laws the agreement will be interpreted in case of later disagreement. Generally speaking, your now-former company will probably pick the state that their headquarters (and most of their lawyers) is in. If you live and work in that same state, then this is probably not controversial. However, if you worked in (and got paid in) another state, you may want to ask the company to change this provision so that the "governing law" is the law of YOUR state, not theirs. They may or may not agree, but it can be worth asking. Remember, they WANT you to sign, or they wouldn't be offering you a bribe to do it. As a practical matter, it usually means that if they decide to sue you (we hope that will never happen) or you them (likewise), it has to happen in your state. And that can be a whole lot more convenient (cheaper) that having to travel to and/or hire a lawyer in their state.

So. This post is already overlong, but it covers most of the main points. Again, don't take my word for ANYTHING, get a lawyer if you have questions. You may well not need to pay said lawyer for more than 1 or 2 hours of his/her time, and that investment could easily save you lots more money and/or grief later. If you do decide to consult a lawyer, get one who is a specialist in employment law, it's a well recognized sub-specialty. Also remember that getting fired/laid off is an emotionally traumatic experience, even if you're not surprised when it happens. You will feel very vulnerable, and frankly, some companies bank on that to manipulate you into signing an agreement that is NOT necessarily in your best interest.

Good luck!
Stay warm, it's COLD out there!

(Need expert application development architecture/coding help? Contact me at: bbalaban, gmail.com)
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