A terminated employee is typically entitled to fair severance, unless he or she did something so serious to warrant losing it (called “termination for cause”).
An employee’s actual entitlement is determined by first looking at whatever deal they might have made with their company. Such a deal – called a “termination clause” – is usually found in an “employment agreement” or in a similar but less formal document signed by both sides. Very commonly, these arrangements are set by the company itself and are most beneficial to it. Therefore, it’s important to try to negotiate early on before signing anything, with the assistance of a trained lawyer.
Courts will only allow arrangements that provide for at least the minimum amount(s) required by the government. Because these arrangements are usually company-friendly, it is necessary to speak to an employment lawyer to determine if there is a legal basis to get a better severance deal than what it appears to say in the agreement. Our firm regularly finds ways to get much better deals for terminated employees in circumstances that allow for it. One example is where an employee is hired to do one job, is promoted several times, and then is terminated years later. The termination section in the employment agreement that was initially signed likely won’t be accepted by the courts in that situation, since the employee is serving a totally different role by that point.
That decision could be the difference between a severance of several thousand dollars… or tens of thousands of dollars.
From an employer’s standpoint, because fair severance can become very costly, the safest thing to do is have an employment lawyer draft an agreement with a legally enforceable termination clause. Too often, we see companies pulling agreements off the Internet, or using non-specialized lawyers to put them together. This is a problem, because very often the law has changed, or a non-expert misses something of significance. The agreements can go a step further to address other issues of importance to the business, such as post-employment obligations, confidentiality, and so forth.
Author: Daniel Chodos, Whitten & Lublin