Getting Fired? Always Negotiate Your Severance Pay

When you get fired, employers will sometimes offer “severance pay” as a “parting gift”. At least that’s how employers frame it. However, it isn’t really a parting gift, it is offered in exchange for a waiver that releases them of all claims you may have against the company. So, in many cases it may provide more benefit to them than it does to you. Which is why you have some bargaining power.

Sometimes, severance pay is anywhere from several thousand dollars to 6-months salary, depending on your status and role at the company. Executives typically get a way higher severance pay than lower level employees.

But for most people, where the severance pay offered is going to be under $10,000, it’s important to include an attorney in your post-employment decisions.

When you accept your severance pay, your ex employer will have you sign a release of all claims you may have against the company – which means you can never sue them for anything ever again.

There might have been issues with your employment that you didn’t even realize were lawsuit-worthy.

For example, I had a client who reported that at her company one of the company’s clients would routinely make comments and grab one of the female employees. The company did nothing to stop it. Their client was a high-paying client so everyone kind of brushed it off, even the CEO and other female executives. This went on for years, and the employee never brought a claim against the company. Understandably, it may have been worth more to the employee to keep her job than to sue the company for sexual harassment. But if she ever got fired and accepted a severance pay for $5,000 in exchange for her silence, she really would have been stiffed because her sexual harassment claim was worth way more.

There are countless reasons why you may have a viable claim against your company, too many to list in this short blog.

So that’s why it’s important to contact a lawyer and review your employment plus the severance offered before making any decisions.

Whats The Bottom Line?

Now, I’m not encouraging people to drum up reasons to sue their employers.

All I’m saying is that when you are given an opportunity to wield your bargaining power – don’t be shy.

Go over your employment history with an attorney and figure out if you have any claims against the company. If they offer you, let’s say, $6,000 in severance pay… just by you having any viable claim at all, even if it’s not inherently worth much, would cost them thousands to defend in court. Companies and insurance groups regularly issue settlements as a “cost of defense.” Defending the action in court requires hiring lawyers, having the company’s dirty laundry aired on the public record, and potentially strapping in for several years of litigation

Even if you don’t have any viable claim that cost of defense for any potential claims is worth a certain dollar amount to them that you can negotiate… You can always negotiate your severance and say “look, I was here for X amount of years, I think I’m owed more”

That won’t carry the same weight as saying “remember that time I was groped by the CEO at a christmas party, I want more money”

But some companies are willing to work with you and if you had a good relationship with them then they may give you more in order to adequately reflect the value of your service.

However, make no mistake, severance pay is offered to shut you down on any remaining claims you have.