Severance: what is negotiable

The first thing to understand about a severance offer is why it exists. The Department of Labor's page on the subject says there is no requirement in the Fair Labor Standards Act for severance pay, and that severance is a matter of agreement between an employer and an employee. An employer that owes nothing and offers something is buying something, and the agreement says what. Reading it that way makes the negotiable parts easier to see.

What the employer is buying

Almost always, a release: your agreement not to bring claims against the company arising from your employment or its end. The release is the reason the money is conditional on signing. It is usually broad, covering discrimination, wage and contract claims, and it usually cannot cover claims that arise after signing or rights that cannot be waived, such as unemployment benefits and vested retirement money.

Agreements often add a non-disparagement clause, a confidentiality clause about the terms, a promise not to sue that overlaps with the release, sometimes a cooperation clause for future litigation, and occasionally a non-compete or a reminder of one already signed. Each of those is a term, and each can be discussed.

The number, and the WARN benchmark

Severance formulas are company policy, not law: a week or two per year of service is common, and the policy may be written in a handbook or plan document that you are entitled to see. One external benchmark exists. Under the WARN Act, an employer that owed 60 days' notice of a plant closing or mass layoff and did not give it is liable for back pay and benefits for the days of notice not given, and the Labor Department's worker's guide notes that paying 60 days in place of notice generally satisfies the Act. If your layoff met the WARN thresholds and your notice was short, an offer below 60 days' pay and benefits is below what the law would award, and that is a fair thing to say in a counter. How WARN notices work sets out the thresholds.

Time to decide

The agreement sets a deadline, and the deadline is itself a term. For employees aged 40 and over, the Older Workers Benefit Protection Act, part of the Age Discrimination in Employment Act, requires that a waiver of age claims be knowing and voluntary, which the statute spells out as at least 21 days to consider the agreement and 7 days after signing to revoke it, and 45 days when the offer goes to a group. Employers meet the standard by writing those periods into the document. Younger employees do not have a statutory period, but a request for a week to read the agreement is routinely granted, and signing on the day is the mistake most often regretted.

The terms that move

The amount moves most often for long service, for a role that is hard to replace in the notice period, or where the release covers something the employer would rather not litigate. The timing of payment moves: a lump sum on signing, or continued payroll for the severance period, which keeps benefits running and can matter for unemployment. Health coverage moves: an employer can pay the COBRA premium for some months, a cost it knows exactly from the COBRA rules, and many do when asked. The reference and the stated reason for leaving move, and a neutral reference letter is cheap for the employer to give. Non-disparagement can be made mutual. Unvested equity or bonus that was days from vesting is sometimes accelerated, and sometimes not, but it is never accelerated if it is not raised.

The terms that usually do not

Vested retirement money and earned wages are yours regardless and are not bargaining chips. A release of claims the employer does not know about yet is standard. Confidentiality about the amount is standard. A non-compete already signed is a separate contract; the severance agreement can loosen it, which is worth asking for, but its absence from the agreement does not cancel it.

How to counter

In writing, briefly, with the terms listed and a reason for each. A counter does not withdraw the offer; the offer stands until its deadline unless the document says otherwise, and asking is expected. Where the amount at stake is large, or the release covers a claim you believe you have, an employment lawyer's review before signing is the proportionate step, and many will review a severance agreement for a fixed fee. Once signed and the revocation period, if any, has passed, the release is what it says.