Introduction
When faced with job termination, the prospect of negotiating a severance agreement can be overwhelming. Many employees, eager to move on, make hasty decisions that can cost them financially and professionally. Understanding the common mistakes made during this process can empower you to avoid them, securing a more favorable outcome. In this blog, we will explore five frequent errors employees make when negotiating their severance packages and provide practical advice on how to steer clear of them.
Mistake 1: Signing Too Quickly
One of the most common errors is the rush to sign the severance agreement without fully understanding its terms. The emotional stress of job loss often leads employees to prioritize closure over careful consideration. However, once you sign the agreement, you may be waiving your rights to future claims against the employer, including the ability to negotiate better terms.
What You Should Do:
Take Your Time: Most severance agreements include a review period, often 21 days under the Older Workers Benefit Protection Act (OWBPA) for employees over 40. Use this time to thoroughly read the document and understand its implications.
Consult an Attorney: Before signing, have a legal professional review the agreement. They can identify any problematic clauses and advise on potential modifications.
Mistake 2: Not Consulting a Lawyer
Many employees forego legal counsel, thinking they can handle the negotiation themselves. However, severance agreements are complex legal documents, and without proper understanding, you may miss critical details or fail to negotiate better terms. A lawyer can provide insight into industry standards, ensure you’re receiving a fair offer, and help you navigate the legalese.
What You Should Do:
Seek Specialized Legal Advice: Not all lawyers are equipped to handle severance negotiations. Find someone who specializes in employment law and has experience with severance agreements.
Understand the Cost: While hiring a lawyer might seem like an additional expense, the benefits often outweigh the costs, especially if they can negotiate a better severance package on your behalf.
Mistake 3: Overlooking Non-Compete Clauses
Non-compete clauses can severely limit your future employment opportunities by restricting where and when you can work after leaving your current job. These clauses are often buried in the severance agreement, and employees may not fully understand their implications until it’s too late.
What You Should Do:
Review Non-Compete Terms Carefully: Understand the geographic scope, duration, and industry restrictions of the non-compete clause.
Negotiate Terms: If the non-compete clause is too restrictive, negotiate for more lenient terms or request compensation in exchange for agreeing to it. In some cases, you may be able to eliminate the clause entirely.
Mistake 4: Failing to Secure References
A severance agreement is not just about the financial payout; it’s also an opportunity to secure your professional future. Many employees overlook the importance of obtaining a written reference or agreeing on the terms of how the employer will communicate about their departure to future employers.
What You Should Do:
Request a Positive Reference: Negotiate for a letter of reference or agree on the wording the employer will use in future reference checks.
Clarify the Terms: Ensure the severance agreement includes a clause that stipulates how the employer will respond to reference requests, including neutral or positive language.
Mistake 5: Ignoring Health Insurance Continuation
Health insurance is a critical component of your severance package, but many employees fail to fully explore their options or negotiate better terms. Losing your job often means losing your health coverage, so it’s vital to understand what’s included in your severance package and what alternatives you have.
What You Should Do:
Understand COBRA: The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to continue your employer-sponsored health insurance for a limited time after termination. However, you will typically be responsible for paying the full premium, which can be expensive.
Negotiate Health Benefits: If possible, negotiate to have your employer cover the cost of COBRA for a certain period or explore other health insurance options.
Conclusion
Negotiating your severance agreement is a critical step in protecting your financial and professional future. By avoiding these common mistakes—rushing to sign, not consulting a lawyer, overlooking non-compete clauses, failing to secure references, and ignoring health insurance—you can better position yourself for success in the next chapter of your career. Remember, a severance agreement is not just about the immediate payout; it’s about securing your long-term well-being. Take the time to understand your rights, consult with professionals, and negotiate the best possible terms. With the right approach, you can walk away from your current job with confidence and security, knowing you’ve done everything possible to protect your interests.