Losing a job is one of life’s most stressful events. The uncertainty about your future, your finances, and your career can be overwhelming. In the midst of this turmoil, you may be offered a severance package. It can feel like a lifeline, a cushion to help you through the transition. But it can also be a source of confusion. Is the offer fair? Are you entitled to more? Should you sign the agreement right away? These are critical questions, and the answers can have a significant impact on your financial well-being.
Many employees in New Jersey mistakenly believe that they are automatically entitled to severance pay when they are terminated. The reality is more complex. Understanding your rights and how to approach a severance offer is crucial to protecting your interests. At Savo, Schalk, Corsini, Warner, Gillespie, O’Grodnick & Fisher, we specialize in executive and severance negotiations, helping employees navigate this challenging process and secure the fair compensation they deserve.
Is Severance Pay Required in New Jersey?
The most important thing to understand is that, in most cases, employers in New Jersey are not legally required to provide severance pay. The exception is in cases of a mass layoff or plant closing, which are covered by the federal Worker Adjustment and Retraining Notification (WARN) Act and a similar New Jersey law. In most individual terminations, however, severance is a matter of policy or negotiation, not a legal entitlement.
So, why do employers offer severance pay? There are several reasons:
- To Obtain a Release of Claims: This is the most common reason. In exchange for the severance pay, the employer will require you to sign a separation agreement that includes a general release. This means you give up your right to sue the company for any potential legal claims, such as wrongful discharge or discrimination.
- Company Policy or Practice: Some companies have a formal policy or an established practice of offering severance to departing employees, particularly those at a certain level or with a certain length of service.
- Employment Contract: If you have an employment contract that specifies you will receive severance upon termination, your employer is legally obligated to honor that agreement.
- To Foster Goodwill: Some employers offer severance to maintain a positive reputation and to ease the transition for the departing employee.
Because severance is often offered in exchange for giving up your legal rights, you mustn’t sign a severance agreement without fully understanding it.
How Much Severance Should You Expect?
Since severance is not usually required by law, there is no set formula for how much you should receive. A common rule of thumb is one to two weeks of pay for every year of service, but this can vary widely depending on several factors:
- Your position and level within the company.
- Your length of service.
- The reason for your termination.
- The strength of any potential legal claims you may have.
- Industry standards.
An experienced employment law attorney can help you assess the fairness of a severance offer by considering all of these factors. If you have a strong potential claim for wrongful termination or discrimination, you may have significant leverage to negotiate a more substantial package.
Negotiating Your Severance Package
It is a common misconception that a severance offer is a take-it-or-leave-it proposition. In many cases, there is room for negotiation. A severance package is more than just money. You can also negotiate for other valuable benefits, such as:
- Continued Health Insurance: You can ask your employer to pay for your COBRA premiums for a certain number of months.
- Outplacement Services: These services can help you with your job search, including resume writing and interview coaching.
- A Positive Reference: You can negotiate the language that the company will use when prospective employers call for a reference.
- The Timing of Your Termination: You may be able to negotiate to have your official termination date be in the future to allow you more time to find a new job.
When you are presented with a severance agreement, you should never sign it on the spot. If you are over 40, federal law gives you at least 21 days to consider the agreement and 7 days to revoke it after signing. Use this time to consult with an attorney. An attorney can review the agreement, identify any problematic clauses, and help you develop a strategy for negotiating a better deal.
Don’t Sign Away Your Rights Without a Fight
Losing your job is hard enough. Don’t make the situation worse by signing away your rights for an inadequate severance package. The agreement your employer puts in front of you was drafted by their lawyers to protect their interests, not yours. You need an advocate on your side who will fight for you.
At our firm, we have extensive experience in reviewing and negotiating severance agreements for employees at all levels, from hourly workers to C-suite executives. We can help you understand the value of your potential legal claims and use that leverage to get you the best possible outcome.
We invite you to contact us for a free, confidential consultation. Let us review your severance agreement and discuss how we can help you move forward with confidence and financial security.
Frequently Asked Questions (FAQ)
Q: I was just laid off. Am I entitled to severance pay?
A: Not automatically. In New Jersey, severance is only legally required in certain mass layoff situations. In most cases, it is a matter of company policy or negotiation. However, if you are asked to sign a release of claims, you should have leverage to negotiate a severance package.
Q: How long do I have to decide whether to sign a severance agreement?
A: If you are over the age of 40, the Older Workers Benefit Protection Act (OWBPA) requires your employer to give you at least 21 days to consider the agreement (45 days in a group layoff) and 7 days to revoke your signature. If you are under 40, there is no legally required consideration period, but you should still take a reasonable amount of time to review it with an attorney.
Q: What happens if I refuse to sign the severance agreement?
A: If you refuse to sign the severance agreement, you will not receive the severance pay being offered. However, you will retain your right to sue your employer for any legal claims you may have, such as wrongful termination or discrimination. This is why it is so important to have an attorney assess the value of your potential claims before you make a decision.