Most severance packages offer a termination payment to an employee in exchange for the employee agreeing not to commence any legal proceedings against the employer.
Here are five reasons why an employee should have an employment lawyer review the severance package.
1. Are you being offered the minimum amount of pay you are owed?
In some cases this is a difficult question to answer. You may be owed a prescribed amount of termination pay under an employment contract or a Company policy. In addition to termination pay, you may be owed vacation pay, overtime pay, commissions, and/or a pro-rated bonus in addition to termination pay. Why would you sign away your rights if you are receiving less money than you are owed?
2. Are you being asked to give up some of your rights as a term of the severance package?
Are you being asked to agree to do certain things as a condition of receiving termination pay? For example, are you being asked to agree not to solicit employees and customers for a period of time after the termination date? If you are otherwise entitled to solicit, why would you give up this right unless you are adequately compensated for doing so?
3. Is the employer offering to help you secure alternative employment?
The short answer is usually no. But the employer can provide you with a positive reference letter as a term of a severance package. It costs the employer nothing and it may be of great value to you in terms of securing new employment. The parties can also agree on how verbal inquires from prospective employers are handled by the employer. Some employers offer to provide outplacement counseling.
4. What rights are you releasing?
Often the employer asks the employee to release every conceivable claim, including: entitlement to accrued and vested pension benefits, stock options, restricted shares, and even the right to take legal action to enforce the terms of the severance agreement itself. In these cases, amendments to the release document are sometimes needed.
5. Is the termination pay offered fair?
This is usually the most important question you are asking yourself. Some employers offer a lump sum while others offer salary and benefit continuation. The answer to this question will generally depend on whether the parties have agreed to a termination amount in an employment contract. If not, the courts look at a number of factors to determine what is fair and reasonable. Factors include the employee’s age, length of service and position. The availability of employment given the employee’s education and experience also comes into play.
To download your copy of “Answers to 20 questions that we are often asked by terminated employees”, please visit www.macleodlawfirm.ca/employees. For more information about termination and wrongful dismissal, read here.
If you have been presented with a severance package and have questions, contact us at [email protected] or 1-888-640-1728 (toll free) or 647-633-9894 (within the GTA).
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