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Don’t Sign the Severance Agreement! (Yet)

As a job search coach, I talk to hard working people every single day who were pink slipped. They have mortgages, car payments and kids in school-- and often they are out of work through no fault of their own. They tell me that sitting across from the HR person in the back corner room was such an overwhelming and shocking feeling that they just complied with whatever they were told to do. They signed the severance package because they just assumed that it was "standard" and the best offer. Here's the thing: severance agreements are incredibly one-sided because they've been drafted by the employer's legal counsel.

There is also very little information on the internet about negotiating severance. I recently read Paul Levy and Farzana Mohamed's new book called, "Don't sign anything: A guide for the day you are laid off" and was impressed with their concise and practical advice for smart employees who want to be armed and knowledgeable if/when they are presented with a separation agreement.

I had the opportunity to do virtual coffee with Paul Levy, Senior Advisor at Lax Sebenius LLC, a negotiation strategy and capability-building firm. Prior to Lax Sebenius, Mr. Levy served as President and Chief Executive Officer of the Beth Israel Deaconess Medical Center in Boston from January 2002 to January 2011. BIDMC is one of the world’s preeminent academic health centers, providing state-of-the-art clinical care, research, and teaching in affiliation with Harvard Medical School.  He also served as Executive Director of the Massachusetts Water Resources Authority, Chairman of the Massachusetts Department of Public Utilities, and Director of the Arkansas Department of Energy. At the MWRA, he had primary responsibility for the “Boston Harbor Cleanup,” one of the largest pollution control projects in the world.  

Sarah: In the United States alone, the Bureau of Labor Statistics reports, 880,000 to 1.5 million people were laid off annually from 2000 to 2008 and from 2010 to 2013 (the last year data was compiled). This happened even when the economy was expanding. During 2009, the height of the Great Recession, 2.1 million Americans were laid off. Globally, unemployment rose by 34 million from 2007 to 2010, data from the International Labour Organization shows.

McKinsey survey of 2,000 U.S. companies found that from 2008 to 2011 (during the recession and its aftermath), 65% resorted to layoffs.

Why are layoffs a common corporate practice?

Paul: Unfortunately, the step often taken by a company--whether start-up or established entity--when facing financial stresses is to lay off people rather than to look more deeply to understand the structural problems that are affecting their profitability. It’s fast, with immediate reductions in cost. It’s “easy,” in that the management team can give the impression of being decisive to their board and shareholders. But, as we all know, there is a large human cost.

Sarah: You’ve had a very successful career-- what prompted you and Farzana to write “Don’t Sign Anything: A Guide for the Day You’re Laid Off”?

Paul: We wrote the book after getting a distressed call from a 38-year old female engineer who was laid off from her job with a high-tech, “green” manufacturer six weeks after returning to her job after maternity leave. After three years working for the company, they wanted to give her two weeks of severance pay and to receive that, they demanded that she sign a non-compete in perpetuity! We advised her not to sign the release letter, and she replied, “Don’t I have to?” It was at that point that we realized that if a competent and experienced person didn’t know her rights--and didn’t know how to negotiate a better deal--there were probably many others. So we wrote the book to be helpful to people who might find themselves in this situation.

Sarah: In your book, you introduce the concept of “BATNA”--- or Best Alternative to Negotiated Agreement”. You discuss why it’s a good idea to think about a result that would “represent a very good outcome”. Why is this important when entering into a severance negotiation?

 Paul: It’s always a good idea when you are negotiating to compare the progress of the negotiation with your alternative--the steps you would take absent reaching an agreement. This tells you what your “walk-away” is. If you don’t do that, you are much more likely to sign an agreement that is subpar, below what is possible if you took another path. And if you sign an agreement that’s worse than your BATNA, you will feel resentful, angry, or otherwise upset.

Sarah: If you are over 40 years old when you are extended a settlement offer, you have rights under the Older Workers Benefit Protection Act (OWBPA), which Congress passed in 1990. Under this law, any terminated employee over 40 years of age who is offered a severance agreement must be given at least 21 days to review that offer.

If an over-40 employee is terminated in connection with a larger group or class of terminations (think a reduction in force, often called a RIF, or the elimination of an entire branch or division of a company), then that employee has 45 days to consider a severance agreement offer. What rights do you have if you are under 40? I’ve heard clients say that they feel pressure in the meeting to sign right away otherwise they won’t have the opportunity to get the same benefits later.

Paul: The answer could vary from state to state. Some jurisdictions require employers to give you a specific amount of time (like 72 hours) to consider a termination offer. But even without legal protection on that front, you should feel comfortable asking for more time.

Remember that the company really, reallywants you to sign that release letter so you don’t sue them or say disparaging things about them. 

So, even if they say you have to sign right away, tell them that you need some time to think about things and will get back to them in a few days. If you ask nicely and give them a definite time frame, they will almost always acede.

Sarah: I want to point out that outplacement assistance is often negotiable. Even if they offer an outplacement package through a national firm like Right Management or Lee Hecht Harrison, you can often ask for a cash alternative and find your own assistance. What advice do you have for someone wanting to negotiate this?

Paul: This is one of those items where the firm is usually quite willing to let you take whatever it would have cost them to provide you with outplacement assistance to use your own advisor. There is no extra cost to them, and agreeing to this might make you more likely to sign the release letter sooner--which is, after all, what they really want.

Sarah: For job seekers with a non-disparagement clause, how do you suggest that they talk about the down-sizing during the interview in a way that complies with the agreement?

Paul: First a non-disparagement clause should go both ways. It is reasonable to reach an agreement with the employer to as to what language you and they will use when describing the other party.

Sarah: Not all employment lawyers are equally competent. How do you recommend people find a reputable lawyer?

Paul: Ask your friends for referrals. Get at least three names. Interview each firm on the phone or in person as to their experience in this arena and what approach they would take. (This shouldn’t cost anything.) Finally ask what their fee arrangement is.

Sarah: What is the best career advice you’ve ever been given? Did you take it? (Asking everyone this question)

Paul: The best career advice I’ve given has been to not take a job that was really not right for me, even if I thought I wanted or needed it. Yes, I took that advice! It pays to listen to a close friend or partner who really cares about you and has a good perspective on what would make you happy.

Sarah: Check out Paul and Farzana's book on Amazon. Think of it as career insurance. Hopefully, you'll never need to negotiate severance-- but if you do-- you are armed with knowledge.

Want to learn more about  Paul Levy andFarzana Mohamed's work? Follow them on LinkedIn or buy their book " Don't sign anything: A guide for the day you are laid off"on Amazon.