Being handed a severance agreement is often a disorienting experience. You’ve just been told that your employment is ending, which is stressful enough, and now you are being asked to sign a complex legal document filled with dense terminology. The employer usually presents the package as a “take it or leave it” offer, complete with a tight deadline. The pressure to sign quickly and secure some financial cushion is immense. You may feel like you have no leverage and no choice but to accept whatever they are offering.
But it is crucial to understand that a severance agreement is a contract, and like almost any contract, it is often negotiable. When an employer offers you severance, they are not doing it out of the goodness of their heart; they are buying something from you. Specifically, they are buying your agreement not to sue them. At jerseyemploymentattorney.com, we help employees level the playing field during executive & severance negotiations. We know how to evaluate these offers, identify your leverage, and fight for a package that truly protects your interests.
Why Employers Offer Severance
In New Jersey, unless you have an employment contract or a union collective bargaining agreement that requires it, employers are generally not legally obligated to provide severance pay. So why do they offer it?
The primary reason is to obtain a “General Release of Claims.” By signing the agreement, you are waiving your right to sue the company for almost any reason related to your employment or termination, including claims for discrimination, sexual harassment, retaliation, or wrongful discharge.
Employers also use severance agreements to impose new restrictions on you, such as restrictive covenants (non-competes or non-solicits) and strict confidentiality or non-disclosure agreements (NDAs).
Finding Your Leverage
The key to negotiating a better severance package is identifying your leverage. Why might the employer be willing to offer you more?
- Potential Legal Claims: This is your strongest leverage. If you have a viable claim for discrimination, whistleblowing, or unpaid wages, the employer has a strong incentive to pay more to ensure you sign the release and don’t file a lawsuit.
- Your Value to the Company: If you possess specialized knowledge, hold key client relationships, or are needed to assist with a transition, you can negotiate for higher pay or consulting fees in exchange for your continued cooperation.
- The Circumstances of Your Departure: If your termination was handled poorly, abruptly, or in a way that could cause public embarrassment for the company, they may be willing to pay more to ensure a quiet exit.
- Inconsistencies with Company Policy: If the company has a history of offering more generous severance to other employees in similar situations, you can use that precedent to argue for equal treatment.
What You Can Negotiate
Severance negotiations are not just about the amount of money. There are many other terms in the agreement that can significantly impact your future, and all of them are potentially negotiable:
- The Financial Payout: You can negotiate for more weeks or months of pay, or for the payout to be structured as a lump sum rather than salary continuation.
- Health Insurance (COBRA): You can ask the employer to cover the cost of your COBRA premiums for a certain period, ensuring you don’t have a gap in healthcare coverage.
- Bonus and Commission Payments: If you were terminated before a scheduled bonus or commission payout, you can negotiate to receive a pro-rated portion of what you earned.
- Outplacement Services: You can ask the company to pay for professional career coaching or outplacement services to help you find a new job.
- The Reference: You can negotiate an agreed-upon, neutral reference (e.g., confirming only your dates of employment and job title) to ensure the company doesn’t badmouth you to future employers.
- Modifying Restrictive Covenants: If the agreement includes a non-compete clause that would prevent you from finding work in your industry, you can negotiate to narrow its scope, reduce its duration, or remove it entirely.
Why You Need an Attorney
Negotiating a severance package on your own is risky. Employers have teams of lawyers drafting these agreements to protect the company’s interests, not yours. If you sign without fully understanding the terms, you could inadvertently waive valuable legal claims or agree to restrictions that cripple your career.
An experienced employment attorney can:
- Evaluate your situation to determine if you have any hidden legal claims that increase your leverage.
- Translate the dense legal jargon into plain English, so you know exactly what you are signing.
- Identify overly broad or unfair clauses (like unreasonable non-competes or NDAs).
- Handle the negotiations directly with the employer, removing the emotion from the process and often securing a better outcome than you could on your own.
Don’t Sign Away Your Rights Without a Fight
A severance agreement is a critical document that marks the end of one chapter of your career and the beginning of the next. You deserve to transition on terms that are fair, secure, and protective of your future. Do not let the pressure of the moment force you into a bad deal.
At our firm, we have reviewed and negotiated countless severance agreements for employees across New Jersey. We know the tactics employers use, and we know how to counter them. We are committed to ensuring that you do not leave money on the table or sign away your rights unnecessarily.
If you have been offered a severance package, we urge you to contact us for a comprehensive review before you sign. Let us help you negotiate the exit you deserve.
Frequently Asked Questions (FAQ)
Q: My employer gave me 21 days to sign the severance agreement. Can they withdraw the offer before then?
A: Generally, yes. Unless the offer explicitly states that it will remain open for the full 21 days, an employer can usually withdraw or modify a severance offer at any time before you sign it. However, if you are over 40, the Older Workers Benefit Protection Act (OWBPA) requires employers to give you at least 21 days to consider the agreement (and 7 days to revoke it after signing) if they want you to waive age discrimination claims.
Q: If I hire a lawyer to negotiate, will the employer just pull the offer completely?
A: It is very rare for an employer to completely withdraw a severance offer simply because an employee hired an attorney to review it or propose reasonable changes. Employers offer severance because they want the release of claims. Having an attorney involved often signals to the employer that they need to take the negotiations seriously.
Q: Can I get unemployment benefits if I accept a severance package?
A: In New Jersey, receiving severance pay generally does not disqualify you from receiving unemployment benefits, provided the severance is paid as a lump sum or is not tied to your continued performance of services. However, the specific terms of the agreement and how the payments are structured can impact your eligibility, so it is important to have an attorney review the language.