Severance Negotiations and Executive Compensation

Unless you have a contract of employment with a specific term of employment, employers typically do not have an obligation to provide a Separation Agreement or severance pay. Generally, however, an executive employee holding a high or mid-level management position will be asked by many employers to sign a Separation Agreement, which usually includes a general release of the employee’s claims against the employer as well as additional provisions, including confidentiality and protection of the employer’s proprietary information.

Particularly with the termination of executives and managers, it is important to understand the types of rights you are being asked to release as well as the extent of the confidentiality and other obligations. Additionally, employers sometimes seek to add a non-competition or non-solicitation provision, also called restrictive covenants, to Separation Agreements.

At a time when companies are reducing their workforces, individual employees often do not receive adequate severance compensation. Many individuals simply assume they have no leverage or basis for demanding more from their employer at the time they are presented with a severance package and release. However, often these employees, either individually or as a group, will have valid legal claims that will enable them to negotiate a more appropriate severance package as they move forward in their careers. In addition, in a down economy, many employers are attempting to cut corners and not provide their employees with compensation and benefits they are entitled such as continuing medical insurance coverage and unemployment compensation.

Once an employee asks for a better package or different terms for a Separation Agreement, the employee may have technically rejected the employer’s offer. Therefore, an employee runs the risk of losing the guaranteed offer by making a counteroffer. However, in practice most employers will typically not rescind their offer if an employee makes a counteroffer, although that is a possibility. Consequently, it is imperative that you seek legal counsel who is knowledgeable in such matters.

Henrichsen Law Group attorneys have decades of experience advising employee clients, whether it be the highest position in the company or the line level employee. We work to protect your rights and preserve the value of your work and past contributions to the company.

If you are facing decisions relating to a Separation or Severance Agreement or an imminent termination from employment, contact the law firm of Henrichsen Law Group, P.L.L.C. for a consultation to assist you.