Top Tips and Answers to Frequently Asked Questions Regarding Layoffs and Severance

As the end of one year wraps up and a new one approaches, employers and employees alike often find themselves setting new goals for the new year. For employers looking to tighten their belts and increase profit, this sometimes means a decision to reduce or reorganize the workforce.  Some employers try to ease the shock (and reduce their risk of lawsuit) by offering employees a severance package in exchange for a release of all claims. These offers can be just the bridge and employee needs to make it to their next job or a Trojan horse offering a shiny package with very little value.

It can be frightening if you're the one caught in this tide of change, but you're not alone. Take a deep breath and consider getting a consultation with an experienced employment attorney- a few hundred dollars could save you thousands in the long run. Here are a few tips to get you started:

The First thing you need to know: Employees in New Hampshire are not automatically entitled to severance in the event of a reduction in force or layoff. 

That said, where employers establish a severance program voluntarily, it may become a right in accordance with the union collective-bargaining agreement or under ERISA, a federal law governing employee benefits. Therefore, if you've been selected for a layoff, you will want to ask your HR representative if the company offers a severance package.

Second, employers rarely offer severance without asking for something in return. 

Keep in mind, when severance packages are offered, they are usually accompanied by release agreements which require you to give up any and all claims you have against your employer in exchange for the payment. When such release agreements are provided to employees as part of a reduction in force and more than one employee is being let go, the company is required to give the employees 45 days to consider the agreement. The company is also required to advise you that you can and should conduct this review with the assistance of an attorney. These provisions are required if The employer wants the release agreement to be enforceable against age discrimination claims and therefore, most release agreements include this provision with time to review the offer. For layoffs involving only one employee, this time period of review is 21 days. 

Tip number three: Take the time you're given to consider whether your employer's offer really has any value to you 

It's absolutely critical to carefully consider the value of the severance offered versus the value of any potential claims you may have for discrimination, wrongful termination, wage claim and the like. The problem is, you may have a claim and not know it. In fact, some employers count on this. That's why they are required to advise you to consult with an attorney if they want to have a release that is enforceable against age discrimination claims. However, Most employees can benefit from a review of their offer and circumstances.

The problem is that employees who have just been laid off are facing a financial crunch and feel ill equipped to incur the cost of a legal consultation. If you're on the fence, you can do a self-assessment, similar to what an attorney would do and this might help you decide whether spending the few hundred dollars it will cost you, is worth it. Some employees are at greater risk than others and who better than you to know whether you might have a claim against your employer. Often times, your common sense, combined with your knowledge of your work history will be enough to steer you in the right direction.

For example, employees who believe they have been subject to unfair treatment in the workplace, unfair selection in the layoff or who believe that they are due additional payment of wages in the form of earnings or benefits, are well advised to use the review period to consult with an attorney.

Severance packages aren't always what they're cracked up to be and this is particularly true where an employee might be giving up important claims against his or her employer. If you think you've been selected for layoff over other eligible employees based upon an injury, disability, being part of a protected class, due to the fact that you had to take time off due to your own injury or disability or because you recently reported some sort of violation or wrongdoing in the workplace, you may have a claim and it very well might be worth it to speak with an attorney to discuss your options before excepting a severance package. 

However, you must do this immediately, within the time period dictated to you for your consideration of the offer. Failure to respond to your employer in the given time period can result in the offer being withdrawn!  

What does a consultation with an employment attorney look like?

An employment attorney will probably want to review your personnel file and discuss your risk factors, including whether you have recently taken time off from work, whether you or a family member suffers from a disability, whether you have filed a Worker's Compensation claim, reported wrongdoing in the workplace, made use of family medical leave time, or if you have been treated unfairly by virtue of your inclusion in a protected class (for example, your age race, religion, gender, veteran status, disability, marital status etc.). 

Your attorney will also want to review the offer and release agreement which is been provided to you and may want to ask your employer for more information as to whether it has a formal severance plan in place.

What if I don't have a claim against my employer? Isn't some money better than no money?

Maybe. However, another important consideration in determining the value of your severance offer is the impact that your severance will have on potential unemployment benefits. Typically, employees laid off from employment (not due to "gross misconduct"), would be entitled to unemployment benefits under New Hampshire law. That's great news, right? Well, yes and no. While laid off employees are entitled to unemployment benefits, the Department of Employment Security can "offset" those benefits by any severance payments made to you. 

This means unemployment may take a credit for any payment you receive from a severance offer and thereby forgo paying you unemployment benefits (or reduce your benefits) for the time period of your severance. Therefore, depending upon the amount of severance that your employer offers you, it may have very little value to you since by getting severance you could be losing the right to unemployment benefits. In most cases, you can't get both the severance and unemployment benefits.

As a result, the value of the severance benefit from the employer May be essentially lost when you take into consideration the fact that you will be ineligible for your full unemployment benefits during the same time period. 

There is Good news.

Here again, an employment attorney may be able to assist you by negotiating your severance offer to include compensation for non-wage benefits in addition to or instead of wage benefits. By doing this, you might be able to get BOTH the severance AND unemployment benefits or at least reduce the impact of the offset.

Here's how it works:

For example, where health insurance benefits are important, a laid off employee might be willing to trade severance in the form of wage, for severance in the form of continued health insurance coverage and this could result in less or even no offset against your unemployment benefits. 

An experienced employment attorney might be able to bring other value to you depending upon your circumstances.

Depending upon your potential claims, an attorney might also assist you in negotiating a greater severance based upon your individual circumstance. Where more than one employee is being laid off at the same time, employers typically offer a set amount of severance to all the employees being let go. Sometimes, employers will increase the amount offered based upon things like years of service or pay scale, but with the assistance of an attorney you might argue that you should be entitled to even more money than your peers, based on your individual circumstances. This is especially true if you are giving up a potential claim. Your attorney can assist you in assessing whether you might be eligible for a greater payment than is being offered and guide you in approaching your employer carefully so as to avoid a withdrawal of the offer and to maximize your chances of a favorable response. A counter offer could be seen as a rejection of the offer and result in the loss of the offer altogether. These negotiations need to be handled very carefully as a result. 

Bottom Line:

It's important to understand that there is no guarantee in any of this. Employers do not have to offer employees any severance under most circumstances and even with the assistance of an attorney, employers may refuse to change or increase an offer that has been made. However, with the foregoing in mind you might be able to determine if a consultation with an attorney could assist you in improving the offer or deciding to bring a claim in lieu of accepting a small offer.

Layoffs pull the rug out from underneath you, frequently leaving a once competent and confident provider feeling scared and powerless. 

Therefore, if nothing else, most clients find they leave a severance consultation happy because the Information they gain is power. It brings with it the peace of mind of having made an informed and careful decision. At a time when the employee feels like all the choices of been taken away, they often learn, they do have choices; the choice to fight back, the choice to negotiate or the choice to except the offer and move on with all their energy focused on new opportunities.