Should You Accept Severance Package? 

You should never sign a severance agreement in a rush, as you are not required to do so. The employer should give you sufficient time to consider the severance offer, and to consult a lawyer if you so choose. Weigh the pros and cons of accepting or rejecting a severance agreement before deciding whether or not to sign.

What is A Severance Package – Is it a Sweet Poison? 

A severance agreement spells out the terms of a termination, it is sometimes called a termination letter. The package includes what pay and benefits are offered to the employee under the severance agreement. The agreement should include all terms of your separation:

  • The effective date of your termination as the termination date often affects eligibility for certain benefits.

  • The amount of severance pay or salary continuation, and an explanation of how this payment will be made (monthly payment or lump sum) should be included. Any vacation time that you have earned but have not yet taken must be paid to you, as well as benefits, options, bonus, insurance coverage and premium contribution, medical benefits that you would be entitled to, but for the termination, during the termination notice period should be included. Severance should be included too, if you are entitled to it.

  • Whether or not taxes will be withheld from your compensation should be clearly stated.

  • If you are covered under the company’s pension plan, the impact of your termination should be explained and defined in the agreement.

  • In exchange for compensation and benefits after your employment ends, the severance agreement usually requires that you promise not to sue. This is fine, but you want to make sure you are not waiving more rights than you are required to by signing the agreement.

  • A statement may be included that states that you will not work for a competitor of the company for a specified amount of time in a particular region. Do note that most non-competition clauses are not legally enforceable in Ontario, unless it’s the best available least intrusive way to protect the interest of the employer, and that it’s very narrow in scope and duration that did not unnecessarily restrict the employee in finding alternative employment.

  • You would probably be required to return any company properties in your possession, which is fine, but you want to make sure you are not required to return items that have been given to you as gifts. I have seen employees who have been given cars, jewelry, and other valuable items as gifts during their employments and were being asked to have them returned to the employer. Although you are required to return company properties, you are NOT require to return gifts to you, which are your property that are rightfully belongs to you. Make sure you maintain all proof that an item is a gift to prevent dispute later.

  • The usual legalese that requires you to waive all your legal rights and entitlements under employment laws for all claims in related to the termination, and that you be required to keep all information in related to the termination private and confidential and not to share with any third party without the employer’s consent. You might want to consult an employment lawyer to make sure you are made fully aware of what legal rights you are waving before you sign the agreement.

Do I Need Legal Representation by an Employment Lawyer in Severance Agreement Negotiation?

An employment lawyer will help you bargain for a better settlement. Let’s face it, no one wants to be sued, and a severance package is by definition an offer to settle. In an employer’s mind, how much to settle hinges on how expensive and time consuming it’s going to be, if the matter has to be resolved through litigation. That’s going to be the employer’s “next best alternative to a settlement”. Yes, by definition, you will most definitely get a lot less by settling the termination than to go through a lengthy ligation, which by the way, you could potentially lose and end up with nothing in your pocket plus a huge legal bill sent to you from the winning side as customarily the winning side gets legal cost award, at least partially, against the losing side.

So most settlement ends up in the middle, and as such the more experienced the employment lawyer that’s representing your interest, the more expensive the “next best alternative to a settlement”, and thus the more the employer is willing to settle the case for.

Keep in mind that employers usually pay severance benefits only after the employee signs a release not to bring claims against the company, so it may make sense to consult with an employment lawyer before signing anything.

Besides, who doesn’t want the benefits of having an experienced employment lawyer, who is familiar with these type of agreements, to explain to you what the complex and sometimes confusing language being used in the severance agreement means in simple plain English? An employment lawyer can help you decide if it is to your advantage to sign the agreement or not. To be or not to be, that’s the question.

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