Articles Posted in Severance

Daniela Adao

In order to minimize the risk of potential litigation, one common practice by employers is to offer departing employees additional severance benefits in exchange for a waiver of rights and release of liability for all claims the employee may have against the employer. Such claims include those arising under federal or state and local laws protecting employees from employment discrimination.

A waiver of rights and release of claims in a Severance Agreement forms a contract between the employer and the departing employee that limits the employee’s rights to bring suit against the employer for matters arising out of the employment relationship. If an employee signs a Severance Agreement containing a waiver and release of claims and later files a lawsuit against the employer alleging discrimination, the employer will argue that the court should dismiss the case because the employee waived his right to sue by signing the agreement.

In an unexpected, albeit late response, Citi Bank has announced that it would no longer honor the severance pay of a number of top executives. The story, which broke on June 2nd, states that 5 top executives would not receive millions promised to them in severance pay. The bank, which is going through a restructuring, is paying out the money to former employees to fulfill contracts that had been drawn up before the recession.

However, while the bank has halted these recent payments, it still has handed out nearly 50 million of the 100 million dollars that had been promised to executives in this year. While other employees are struggling to get by after being laid off with no benefits or severance, these few executives who oversaw these companies are walking away with millions to show. The article sites that the company withdrew the bonuses to avoid public backlash, but this move may just highlight the money that the banking industry has given to those at the top, while stranding their customers and employees.

Yesterday, it was revealed that Microsoft had sent letter to a number of recently laid off workers that it had accidentally overpaid them in their severance packages stemming from their firing of nearly 5,000 of their employees. The employees, victims of the first major layoff in the software giant’s history received letters instructing them to immediately remit the overages in their packages in exchange for a corrected tax document so they would not be taxed on the over paying.

However, after a flurry of bad PR for Microsoft the company quickly backpedaled and allowed the affected individuals to keep the overage. This is good news for the employees affected, but a troubling sign for workers in the marketplace as more and more workers are being let go in the economic downturn. If you have been let go, have an attorney review any severance packages offered as a part of the deal to ensure that your best interests are preserved, and to avoid any questionable tactics on the part of the employer.

With the recent economic downturn, millions of American’s find themselves struggling to cope with the realities of losing their employment. The number layoffs in certain areas are unprecedented and terminations are becoming common in all sectors of the job market. Being terminated from a job is stressful, daunting and presents a host of problems previously unconsidered. However, you are not alone and frequently options remain available.

Upon termination, an employee may be presented with a severance package or separation agreement, particularly if the employer is offering severance pay. However, most employees are not aware of their full range of options available to them when presented with an agreement. For instance, employees are entitled to have an attorney review any severance or separation agreement. Furthermore, employees have the right to negotiate the terms of any agreement presented to them and are under no obligation to sign the agreement on the spot. By negotiating the terms of their severance and separation agreements, an employee has the opportunity to maximize her compensation in the event of a termination. An employee must understand that by signing a separation agreement, she may be waiving many important rights.

One such waiver could be a release of claims. A release of claims usually accompanies a severance package wherein an employee relinquishes her right to sue if a severance package is accepted. An individual should carefully review the terms of an agreement with an attorney to consider all available options. You may also want to seek counsel regarding contracts signed upon beginning new employment, such as non-compete agreements, non-solicitation agreements, or contracts regarding confidentiality.