Boston Severance Package Lawyers
Severance Package Agreements
A severance agreement is an agreement between an employer and employee specifying the terms of employment termination. In exchange for agreeing not to sue an employer, the employee receives money and/or other benefits. Severance pay is typically conditioned on involuntary termination without cause.
Employers offer severance packages for two important reasons: (1) they want current employers to see departing employees treated fairly; and (2) they want to limit liability.
Severance pay is often tied to the number of years an employee has worked. According to a recent survey by WorldatWork, an international human resources association, 71 percent of firms that use severance agreements use the number of years worked to calculate severance payments. Thirty-one percent of those companies offer a week’s salary for each year worked; 20 percent grant two weeks’ salary for each year served.
Of note, WorldatWork found that “69 percent of organizations have not reviewed their severance plans in at least the past 12 months, while 13 percent of organizations report never having reviewed their plans since these were established.”
Company packages also calculate severance pay based on an employee’s position or pay. According to CNN, Fidelity Investments, hit hard by the downturn in the financial sector, will pay laid-off workers a figure based on salary and years of service. CNN also reported that Circuit City, the nation’s second-largest electronics retailer, will pay pink-slipped managers and associates 60 days’ salary.
Former Lehman Brothers employees have not been so lucky. In October the defunct financial company cut off severance payments after filing for Chapter 11 bankruptcy. These laid off employees will have to wait in line with Lehman Brothers’ other creditors in hopes of getting their pay packages.
Massachusetts does not require severance agreements, and no employee is entitled to severance pay. Agreements signed under duress, however, are not enforceable. In general, a former employee is ineligible for unemployment insurance while he or she is receiving severance pay; the Massachusetts Department of Labor and Workforce Development prorates lump sum severance packages.
Some severance agreements include health care benefits or accrued vacation time. For example, eBay’s recent severance package for more than 1,000 employees contained benefits for up to five months.
Other agreements condition severance pay on an employee’s agreement not to work for the competition. Some employers offer outgoing employees outplacement services to help them find new positions. An employee can even negotiate for a provision limiting what an employer can disclose to a potential future employer.
If you are an employee who has just been offered a severance agreement, or an employer who wants more information about drafting one, call Parker Scheer toll free seven days a week at 866-414-0400 to speak with an experienced employment law attorney. All information furnished will be kept strictly confidential.
Parker | Scheer employment law attorneys represents both companies and employees. Our attorneys are happy to assist businesses in drafting severance agreements and to assist employers and employees in successfully negotiating them.
Contact Parker|Scheer Employment Law Attorneys
For more information on Massachusetts employment law or if you are seeking an employment law attorney or a business lawyer for any other needs, please contact Barry Scheer. If you prefer, you can also telephone our offices in Boston seven days a week at toll free 866-414-0400.
Barry S. Scheer is a partner and co-founder of Parker Scheer LLP, and serves as director of the firm's Business Law and Litigation Group. With more than twenty-five years of experience in the area of business litigation and corporate law, Mr. Scheer is widely regarded as among Massachusetts' leading business litigation attorneys.