John Maher: Hi. I'm John Maher. Today, I'm here with Samuel Perkins, a founding partner of Brody, Hardoon, Perkins & Kesten in Boston, Massachusetts. Sam has been lead counsel in dozens of jury trials in the federal and state courts of Massachusetts and Vermont and his diverse practice areas include commercial litigation and employment law.
Negotiating Severance Deals with Employers
Today, we're talking about negotiating a severance package. Welcome, Sam.
Samuel Perkins: How are you?
John: Good, thanks. Sam, what will a severance lawyer do for me in terms of negotiating me a better severance deal with my employer?
Sam: Well, because we're in Massachusetts and most people who are being laid off and negotiating a severance offer do not have a legal right to a severance package, normally, what we're looking for is negotiating leverage that will allow us to convince the employer that the employee's claims that they're giving up as part of the severance package are much more valuable than the employer believes.
That really, at its simplest, consists of spending time with the employee, going over their work history, finding out whether there's any basis for legal claims under state and federal employment law that the employee can possibly assert as a way of negotiating a higher severance.
Leverage for Negotiating a Severance Package
John: What would be some examples of those issues that might arise in the course of my employment that might give me that leverage to negotiate a better severance package?
Sam: Sure. Under most federal and state employment laws, there are substantial liabilities that employers face, which can include multiple damages, punitive damages, and an award of attorney’s fees. In a situation where an employee is being laid off, say, from a small startup company, and over time the startup has had difficulty paying the employee on time -- there's been a delay in paying wages beyond the normal payment period or there's been nonpayment of overtime -- those claims can lead to double and treble damages and attorney's fees.
If we find that in the history of the employment those things have occurred, they allow us to negotiate a higher severance. The same is true for any kind of history of gender discrimination or any of the other prohibited discriminatory bases like religion, race, sexual preference and so on.
John: What is the opposite or the other recourse that somebody might have if they have one of these problems, that they were wrongfully terminated for some issue? Does it generally work in the favor of the employer to try to negotiate a severance package and take that severance package? Or is it worthwhile, in some cases, to go through -- what would it be? -- a trial instead, and maybe take a chance on not winning in that trial?
Sam: I think that employers are sensitive to these situations. Whenever they hear pushback from an employee, that the employee has a claim, the employer does want to try to resolve that claim in the context of a severance package. There's advantages obviously to the employee as well in getting it resolved quickly, not having to file suit, not having to spend time -- which can be years -- in litigation, in order to vindicate a claim. It's much better to settle it early on.
In our experience these issues come up very quickly. Normally when an employee comes to us with a proposed severance package and we learn that they have a viable claim, we normally will do a very extensive demand letter -- sometimes as long as 14 or 15 pages -- laying out the history of the employment relationship and all the federal and state laws that have been violated by the employer, in our view, and make a demand. The employer obviously has a strong incentive to come back with a settlement offer as part of the settlement package or the severance package.
What should I make sure is included in a severance package before I sign it?
John: What should I make sure is included in a severance package before I sign it?
Sam: When an employee leaves, it's a pretty emotional time. People are under enormous financial stress. They worry about paying for the kid's education and having their budgets basically blown by not having that income anymore.
One issue is the timing of payments. A lot of employers want to continue to make payments over time. Employee sometimes will prefer to see it as a lump sum. Negotiating the pace of payment is an important consideration.
It's important to get outplacement. Most employees, really, when they have lost their job, are not ready to dive back in the job search market, and they need some consulting help to get them started. A lot of employers will offer that as a benefit, with an outplacement company.
There are also questions about making sure that whatever was available to you in the way of payments for vacation, for overtime and for sick time, which you did not use, are all totaled up and included in whatever gets paid to you, because you should be getting those over and above whatever the severance agreement payment would be.
Do Massachusetts labor laws have any effect on severance pay?
John: Do Massachusetts labor laws have any effect on severance pay?
Sam: Well, Massachusetts labor laws, obviously, and federal labor laws, are the ones that determine whether you have a valuable claim against the employer that you can negotiate away for an increase of severance, so they do in that sense. But there aren't any specific laws that dictate how a severance package has to be done.
John: Right. So there are no outlines in terms of, "Okay, if this happens, then you should get this amount of money in a severance package or this percentage of your income in a severance package." Nothing like that?
Sam: No. Unless you have a contract with the employer, union agreement, or you're covered by civil service. Whatever payments you are going to receive in your severance package are up to the negotiation between you and the employer.
John: All the more reason to have an attorney on your side who knows all about severance packages and negotiating those. It sounds like it would be really difficult to try to negotiate that on your own.
Sam: It's always worthwhile talking with a lawyer. What we try to do when we meet with clients is to give them very early assessment as to whether we can add value to their situation. We don't want to have people spend a bunch of money getting advice from us if it's not going to improve their severance situation.
John: Great information. Samuel Perkins, thanks very much for speaking with me today.
Sam: It's a pleasure.
John: For more information about Brody, Hardoon, Perkins & Kesten, visit the firm's website at bhpklaw.com or call 888‑877‑6393.