DOCSLIB.ORG

Managing Your Workplace in an Economic Downturn Dean Palmer Lorraine Allard Kate Mcneill Brian Wasyliw

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Managing Your Workplace in an Economic Downturn Dean Palmer Lorraine Allard Kate Mcneill Brian Wasyliw Managing Your Workplace in an Economic Downturn Dean Palmer Lorraine Allard Kate McNeill Brian Wasyliw March 12, 2009 McCarthy Tétrault LLP Box 48, Suite 5300 Toronto Dominion Bank Tower Toronto ON M5K 1E6 www.mccarthy.ca Managing Your Workplace in an Economic Downturn Introduction Despite the legal requirements and obstacles that must be considered, there are positive steps that employers can take to reduce labour costs now while preparing for the better times to come in the future. This paper is designed to provide an overview of the options available to employers and the legal considerations that must be included in any strategic decision impacting on the workforce. It also identifies practical employment-related considerations that may impact on the cost-benefit analysis that you will be conducting when making such decisions. This paper focuses on the applicable legislation in Ontario. For workplace decisions in other provinces, the applicable federal or provincial legislation should be considered. Finally, each of the options outlined in this paper are described in general terms. For specific application relating to your workplace, please feel free to contact any of the members of our Labour & Employment Department or Pensions & Benefits Department who would be pleased to assist you in developing the most appropriate specific strategy for your business. Option 1 – Reductions in Head Count One of the first cost reduction options that springs to mind in the event of economic pressure on a workplace is a reduction in head count either by way of terminations of employment, temporary lay-offs or voluntary retirement. A. Terminations Terminations of employment that are tied to economic reasons and the restructuring of a workplace are considered to be without cause terminations and result in a permanent reduction in head count. This is the most drastic option as a result of its permanence and may be an expensive option given the upfront cost of severance packages. However, it does present an opportunity to critically assess your workforce and eliminate employees who have performed poorly. The key point is to keep your strong employees and part with the weak. As a result, the cost of a fair severance package may in fact be a worthwhile investment in building a high performance workforce. Individual Terminations In the absence of an enforceable written contractual termination provision in an employment agreement that dictates what an employee is entitled to in the event of a without cause termination, the common law implies an obligation to provide the employee with reasonable notice which is calculated based on criteria including the employee’s age, length of service, the character of the position and the availability of suitable alternative employment. This is over and above but inclusive of the statutory notice of termination or pay in lieu thereof to which employees are entitled under the Ontario Employment Standards Act, 2000 (the “ESA”). Page 1 Managing Your Workplace in an Economic Downturn Under the ESA, when terminating the employment of someone who has been continuously employed for three (3) months or more, the employer must provide either: (a) written notice of termination; or (b) termination pay in lieu of notice; or (c) a combination of the two. If written notice is given, the employee must be paid his or her regular wages throughout the notice period. The benefit of giving working notice rather than pay in lieu thereof is that you derive the benefit of the employee’s continued work efforts during the course of the notice period. The risk, however, includes the potential impact on employee morale, quality of work, loss of confidential information, disruption of customer relationships and the overall impact on the workplace. The amount of written notice that is required is entirely dependent on how long the employee has been employed by the employer. The ESA specifies the following mandatory minimum notice periods: Length of Employment Amount of Notice Required Less than 3 months No Notice Required 3 months or more but less than 1 year 1 week 1 year or more but less than 3 years 2 weeks 3 years or more but less than 4 years 3 weeks 4 years or more but less than 5 years 4 weeks 5 years or more but less than 6 years 5 weeks 6 years or more but less than 7 years 6 weeks 7 years or more but less than 8 years 7 weeks 8 years or more 8 weeks In the event that the employer opts to provide the employee with termination pay in lieu of notice, the employer must pay the employee a lump sum payment equal to the regular wages for a regular work week that an employee would have earned during the notice period had notice been given. It is important to note that the term “regular wages” under the ESA includes all wages other than overtime pay, vacation pay, public holiday pay, premium pay, termination pay and severance pay and certain contractual entitlements. Further, a special method for calculating termination pay applies to employees who do not have a regular work week or are paid on a basis other than time worked (e.g. employees who work on a commission-basis). In addition to notice or pay in lieu thereof, under certain circumstances, there is a statutory obligation in Ontario to pay severance pay. An employee qualifies for severance pay when his/her employment is severed and he/she: Page 2 Managing Your Workplace in an Economic Downturn (a) has worked for the employer for five (5) or more years (whether continuous/active employment or not); and (b) was employed by an employer who: (i) has a payroll in Ontario of at least $2.5 million; or (ii) severed the employment of fifty (50) or more employees in a six (6) month period because all or part of the business was permanently discontinued (discussed below). Severance pay is calculated by multiplying the employee’s regular wages for a regular work week by the sum of (i) the number of completed years of employment and (ii) the number of completed months of employment divided by twelve (12) for a year that is not completed. The maximum amount of severance pay required to be paid under the ESA is the employee's regular wages for a period of twenty-six (26) weeks. Mass Terminations Under the ESA, a mass termination occurs when fifty (50) or more employees in the same establishment have their employment terminated within a period of any four (4) consecutive weeks. In the event of a mass termination, notice must be given to the Director of Employment Standards (Ministry of Labour) before the notice of termination to employees (or pay in lieu of notice) can commence. This notice must also be posted in a conspicuous location in the workplace on the first day of the notice period. The notice to the Director must be in the prescribed form, is effective as soon as it is received by the Director and may include the following information: • the name and address of the employer; • the locations where terminations will take place; • the total number of hourly, salaried and other employees at each location; • the total number of employees who will be terminated at each location and the expected date of termination; • the name of the trade union representing the employees, if any; • the economic circumstances surrounding the terminations; • the alternatives to termination implemented and discussed; and • any adjustment measures discussed with employees and their agent, if any. Under the mass termination provisions of the ESA, the statutory working notice or pay in lieu thereof that must be provided is dependant on the number of employees terminated rather the employee’s length of service, and therefore is considerably higher than the ESA notice requirements that apply in the case of an individual termination: Page 3 Managing Your Workplace in an Economic Downturn Number of Employees Terminated Amount of Notice Required 50 or more but less than 200 8 weeks 200 or more but less than 500 12 weeks 500 or more 16 weeks It should be noted that in addition to this ESA notice, both the common law notice and ESA severance pay still apply as well. In most cases, it is the common law obligation that is the greatest and it is the common law obligation that will drive your budget planning in a downsizing. Further, except for the employee’s statutory severance pay entitlement, the employer may give working notice of termination, in whole or in part. In other words, the Court will consider the period of working notice as well as any lump sum payments (including amounts paid pursuant to the respective statute but excluding accrued vacation pay) in determining whether the employee was given reasonable notice of termination and/or pay in lieu of such notice. Benefits During Notice Periods In both an individual and mass termination situation, at a minimum employers must continue to make the benefit plan contributions required to maintain an employee’s benefit plans during the statutory notice period. This applies regardless of whether the employee has received pay in lieu of notice or has worked part or all of the notice period. Also, during the common law (or contractual) notice period, an employer is liable for all remuneration (including benefits) that an employee would have received had he or she been working during that notice period, subject to and in accordance with the terms and conditions of the applicable plans. Accordingly, in order to minimize exposure to possible liability from a benefits perspective, it is advisable for employers to maintain benefit coverage for such employees during the notice period pending the signing of a binding release.
Load more

Recommended publications
  • Reductions in Force in Employment Law Second Edition
    REDUCTIONS IN FORCE IN EMPLOYMENT LAW Second Edition Ethan Lipsig Mary C. Dollarhide Brit K. Seifert Paul Hastings LLP BNA Books, A Division of BNA, Arlington, VA Copyright © 2007, 2011 The Bureau of National Affairs, Inc. Library of Congress Cataloging-in-Publication Data Lipsig, Ethan. Reductions in force in employment law / Ethan Lipsig, Mary C. Dollarhide, Brit K. Seifert. -- 2nd ed. p. cm. Includes index. ISBN 978-1-57018-718-6 1. Layoff systems--Law and legislation--United States. 2. Employees--Dismissal of-- Law and legislation--United States. 3. Downsizing of organizations--United States. 4. Notice (Law)--United States. I. Dollarhide, Mary C. II. Seifert, Brit K., 1968- III. Title. KF3471.L577 2011 344.7301’2596--dc22 2011012865 All rights reserved. No copyright claimed in U.S. government materials. Photocopying any portion of this publication is strictly prohibited unless express written authorization is first obtained from BNA Books, 1801 South Bell St., Arlington, VA 22202, bnabooks.com. Authorization to photocopy items for internal or personal use, or the internal or personal use of specific clients, is granted by BNA Books for libraries and other users registered with the Copyright Clearance Center (CCC) Transactional Reporting Service, provided that $1.00 per page is paid directly to CCC, 222 Rosewood Dr., Danvers, MA 01923, copyright.com, Telephone: 978-750-8400; Fax: 978-646-8600. Published by BNA Books 1801 South Bell St., Arlington, VA 22202 bnabooks.com ISBN: 1-57018-718-6 Printed in the United States of America CHAPTER 1 GETTING STARTED I. Overview ....................................................................................................1-1 II. Establishing Objectives and Constraints ....................................................1-5 III.
    [Show full text]
  • Executive-Severance-Arrangements
    About Meridian Compensation Partners, LLC Meridian Compensation Partners, LLC is one of the largest independent executive compensation and corporate governance consulting firms in North America. Meridian consultants advise Boards of Directors and Senior Management on the full range of executive compensation issues that confront them. Whether the subject is compensation philosophy, pay for performance, incentive plan designs, retention, shareholder initiatives, mergers and acquisitions or Board governance, we have the resources, experience, expertise and judgment to help. We guide Compensation Committees as they make difficult but informed decisions on executive pay. Meridian Compensation Partners, LLC 100 N. Field Drive Suite 300 Lake Forest, Illinois 60045 Phone: (847) 235-3600 www.meridiancp.com © 2012 Meridian Compensation Partners, LLC. The material in this publication may not be reproduced or distributed in whole or in part without the written consent of Meridian Compensation Partners, LLC. The Standard & Poor’s 500® index is a registered trademark of Standard & Poor’s Financial Services, LLC, a wholly owned subsidiary of The McGraw-Hill Companies. Questions or comments regarding this publication should be directed to Donald Kalfen at [email protected] or 847-235-3605. PAGE 1 2012 GENERAL SEVERANCE ARRANGEMENTS DECEMBER 2012 Contents ■ Report Scope and Study Group Characteristics 3 ■ Overview of Executive Severance Arrangements 5 ■ Key Findings 6 ■ Prevalence of Payment Triggers and Related Definitions 7 ■ Cash Severance Benefits
    [Show full text]
  • 2:10-Cv-12979-SFC-RSW Doc # 33 Filed 03/26/12 Pg 1 of 14 Pg ID 908
    2:10-cv-12979-SFC-RSW Doc # 33 Filed 03/26/12 Pg 1 of 14 Pg ID 908 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Octavio Penedo, Plaintiff, v. Case No. 10-12979 Valero Inc., Honorable Sean F. Cox Defendant. _________________________________/ ORDER ADOPTING REPORT AND RECOMMENDATION Plaintiff Octavio Penedo (“Plaintiff”) filed this ERISA action against his former employer, Defendant Valeo Inc. (“Valeo”), alleging that Valeo wrongfully denied Plaintiff severance benefits under Valeo’s Employee Benefit Plan. Thereafter, Plaintiff filed a motion for summary judgment to reverse the Plan Administrator’s decision and Valeo filed a motion to affirm the Plan Administrator’s decision. Those motions were referred to Magistrate Judge Steven Whalen, pursuant to 28 U.S.C. § 636, for issuance of a report and recommendation. On August 31, 2011, Magistrate Judge Whalen issued his report and recommendation (“R&R”) (D.E. No. 29), wherein he recommends that the Court grant Plaintiff’s motion for summary judgment and deny Valeo’s motion for summary judgment. On September 16, 2011, Valeo filed written objections to the August 31, 2011 R&R. (D.E. No. 30). For the reasons set forth below, the Court shall ADOPT the report and recommendation in its entirety. 1 2:10-cv-12979-SFC-RSW Doc # 33 Filed 03/26/12 Pg 2 of 14 Pg ID 909 BACKGROUND Plaintiff was employed as the Tax Director of Mexican affairs for Valeo at their Troy, Michigan office. Valeo provided Plaintiff a benefits package, which included severance benefits, pursuant to Valeo’s Employee Benefit Plan (the “Plan”).
    [Show full text]
  • Annual Pay Policy Statement 2018/2019
    Summons Item 8. Stockport Metropolitan Borough Council Annual Pay Policy Statement 2018/19 1. Introduction 1.1 This Pay Policy Statement (the ‘statement’) sets out the Council’s approach to pay policy in accordance with the requirements of Section 38 of the Localism Act 2011. The statement also has due regard for the associated statutory guidance including supplementary guidance issued in February 2013 and the Local Government Transparency code 2014. For the first time the statement also incorporates the Councils Gender Pay Gap information as the Council is now required to publish this on an annual basis under the GPG reporting requirements. 1.2 The purpose of the statement is to provide transparency with regard to the Council’s approach to setting the pay of its employees (excluding teaching staff working in local authority schools) by confirming the methods by which salaries of all employees are determined; the detail and level of remuneration of its most senior staff i.e. ‘chief officers’, as defined by the relevant legislation; the responsibility of the Appointments Committee to ensure the provisions set out in this statement relating to the Chief Executive, Deputy Chief Executive, Corporate Directors and Service Directors are applied consistently throughout the Council and recommend any amendments to the Council. 1.3 Once approved by the full Council, this policy statement will come into effect from the following April and will be subject to review on a minimum of an annual basis, the policy for the next financial year being approved by 31 March each year. 2. Other legislation relevant to pay and remuneration 2.1 In determining the pay and remuneration of all of its employees, the Council will comply with all relevant employment legislation.
    [Show full text]
  • Severance Pay: What It Is and Why You Should Negotiate a Package Before Accepting a Job Acosta, Deborah
    Severance Pay: What It Is and Why You Should Negotiate a Package Before Accepting a Job Acosta, Deborah . Wall Street Journal (Online) ; New York, N.Y. [New York, N.Y]16 Dec 2020. ProQuest document link FULL TEXT In brief * Employers aren't legally required to pay severance in most cases. * Be aware of your company's severance package and try to negotiate it before accepting a job offer. * The success of your negotiation depends on how much leverage you have. The best time to negotiate severance pay is when you and your employer don't think you will need it: when you have been offered the job . "It's a little bit like a prenuptial agreement," says Wayne Outten, the founding partner and chair of Outten and Golden LLP, an employee-side law firm. "It's not very romantic, but you want one just in case things don't work out." Employees are less likely to stay with one company for life than they used to be and it is important to plan for the eventual moment when you and your employer part ways. What is severance pay and how does it work? Severance pay is a sum of money or other benefits that an employer offers a worker who leaves the company under certain circumstances. You might receive severance pay if you are being laid off, your job is eliminated , or if you and your employer mutually agree to part ways. In most cases, severance pay isn't required by law, but some companies have established policies for offering it.
    [Show full text]
  • Severance Packages
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Postel-Vinay, Fabien; Turon, Hélène Working Paper Severance packages IZA Discussion Papers, No. 6023 Provided in Cooperation with: IZA – Institute of Labor Economics Suggested Citation: Postel-Vinay, Fabien; Turon, Hélène (2011) : Severance packages, IZA Discussion Papers, No. 6023, Institute for the Study of Labor (IZA), Bonn, http://nbn-resolving.de/urn:nbn:de:101:1-201110263632 This Version is available at: http://hdl.handle.net/10419/58674 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu IZA DP No. 6023 Severance Packages Fabien Postel-Vinay Hélène Turon October 2011 DISCUSSION PAPER SERIES Forschungsinstitut zur Zukunft der Arbeit Institute for the Study of Labor Severance Packages Fabien Postel-Vinay University of Bristol, Sciences Po and IZA Hélène Turon University of Bristol and IZA Discussion Paper No.
    [Show full text]
  • PALSSU Agreement
    DocuSign Envelope ID: DC47C24E-C072-410E-A17A-882E5F58436FD27FCF74-189C-431C-AC45-D37DBE628164 LETTER OF AGREEMENT BETWEEN CITY OF SANTA MONICA AND PUBLIC ATTORNEYS LEGAL SUPPORT STAFF UNION Representatives of the City of Santa Monica (City) and the Public Attorneys Legal Support Staff Union (PALSSU) have reached an understanding as to the impacts of the City’s restructuring and budget reduction process approved by City Council on May 5, 2020, in response to the COVID-19 public health crisis, which has resulted in a reduction in force affecting employees represented by PALSSU. This Letter of Agreement shall operate to amend the current Memorandum of Understanding between the parties (Contract No. 10744 (CCS)) that presently is in full force and effect, as follows: 1. Lay-off Severance Package In addition to the accrued leave cash outs to which employees separated from City employment are legally or contractually entitled as of the date of their separation, the City will provide a severance package to each PALSSU employee being separated from the City due to layoff because the employee’s position has been eliminated as a result of the City reorganization described above. The severance package will include: a. A lump sum payment of $16,000; provided, however, that if the City agrees to a severance payment for laid off employees of more than an average of $16,000 per separated employee (or agrees to provide any such laid off employee with an additional item of value that causes his/her severance package to exceed an average value of $16,000) with any of the following bargaining units: ATA, IBT, FEMA, Local 1109, MEA, MTA, PAU, POA, SMART-TD, or STA, then the City shall provide such PALSSU employees with the same severance amount and/or item of value as agreed to with the other bargaining units; and 2.
    [Show full text]
  • Sample of Furlough Letter (Covid-19)
    How to Use this Document: On the first page, you’ll see text set [within brackets]. Brackets indicate text that you can edit. You can make changes to the text on page two and then delete page one. SAMPLE OF FURLOUGH LETTER (COVID-19) [date] [employee name and address] Re: Notice of Furlough Dear [employee name], We regret to inform you that because of the current level of work available as a result of COVID-19, we have opted to place you on furlough (temporary layoff) during the next [number] weeks. You are not authorized to work during the furlough without advance written authorization from [manager, supervisor, or other]. The furlough will begin on [date]. We are hopeful that we will be able to restore you to your prior position with our company on or around [date]. However, it is important to note that we reserve the right to change this date based on our business needs. During this period: 1. You will retain your seniority with the company. 2. [Remove language if not applicable] The Company will pay for both your portion and the company’s regular contribution of your health insurance. Upon your return, you may be required to reimburse the company for the catch-up contributions. 3. You may be eligible for unemployment benefits during this time. We recommend contacting the [state] unemployment department for further information and to apply. 4. [Remove language if not applicable] If you have available vacation time/PTO that you would like to use during this time, you are welcome to use such time, but are not required to do so.
    [Show full text]
  • CMAA Severance Checklist
    CMAA Severance Checklist Introduction: The following information is designed to be a reference document for your severance package negotiations. It includes general information regarding statistics and figures and other considerations when constructing your severance package. Background/Fact & Figures: CMAA studies show that many of today’s general managers/COOs/CEOs have an employment contract. One of the benefits to having a formal employment agreement or contract is to clearly define the terms of employment and, as important, the terms of separation . • 74 percent of CMAA members that have the title of CEO/COO have an employment contract and more than 60 percent of those are multi-year contracts. • The average length of a multi-year contract is three years. • 44 percent of CMAA members with the title of general manager have an employment contract . • 27 percent of CMAA members with the title of manager have an employment contract . • 35 percent of CMAA members with the title of clubhouse manager have an employment contract. Ideally , a severance package is addressed during your pre-employment contract negotiations; however , often times managers find themselves having to negotiate these terms after being informed they are to be terminated. This guide will help you identify the items to include when constructing your severance package . It is strongly recommended that you include language in an employment agreement on the terms of separation prior to taking employment or accept - ing a promotion, but if you are unable to do that, consider proposing such language during an annual performance review. In the cases where there is not an employment contract and em - ployment is abruptly ended, this document can serve as a checklist of items to consider when coming to terms with your employer.
    [Show full text]
  • Employment Downsizing and Its Alternatives
    SHRM Foundation’s Effective Practice Guidelines Series Employment Downsizing and its Alternatives STRATEGIES FOR LONG-TERM SUCCESS Sponsored by Right Management SHRM FOUNDAtion’S EFFECTIVE PraCTICE GUIDELINES SERIES Employment Downsizing and its Alternatives STRATEGIES FOR LONG-TERM SUCCESS Wayne F. Cascio Sponsored by Right Management Employment Downsizing and its Alternatives This publication is designed to provide accurate and authoritative information regarding the subject matter covered. Neither the publisher nor the author is engaged in rendering legal or other professional service. If legal advice or other expert assistance is required, the services of a competent, licensed professional should be sought. Any federal and state laws discussed in this book are subject to frequent revision and interpretation by amendments or judicial revisions that may significantly affect employer or employee rights and obligations. Readers are encouraged to seek legal counsel regarding specific policies and practices in their organizations. This book is published by the SHRM Foundation, an affiliate of the Society for Human Resource Management (SHRM©). The interpretations, conclusions and recommendations in this book are those of the author and do not necessarily represent those of the SHRM Foundation. ©2009 SHRM Foundation. All rights reserved. Printed in the United States of America. This publication may not be reproduced, stored in a retrieval system or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the SHRM Foundation, 1800 Duke Street, Alexandria, VA 22314. The SHRM Foundation is the 501(c)3 nonprofit affiliate of the Society for Human Resource Management (SHRM).
    [Show full text]
  • Estimated Year Income Part 1 of 2 2021 – 2022
    Y school of medicine Financial Aid O∞ce Estimated Year Income part 1 of 2 2021 – 2022 Student / Parent information Student’s Name: __________________________________________________________ MD pa Yale ID Number: _______________________________________ Date of Birth: ___________________ Student’s Permanent Address: ____________________________________________________________ Student’s Email: ________________________________________ Phone: ________________________ Parent’s Email: _________________________________________ Phone: ________________________ 2021 Income Update Who is experiencing the loss of wages? ________________________________________ Unemployment start date: __________________ WAGES EXPECTED IN 2021 2021 ESTIMATED Wages earned by Parent 1/Step Parent 1 (January 1, 2021 to present) $ Wages earned by Parent 2/Step Parent 2 (January 1, 2021 to present) $ Total Expected Wages that will be earned by Mother/Stepmother in calendar year 2021 $ (January 1 through December 31) Total Expected Wages that will be earned by Father/Stepfather in calendar year 2021 $ (January 1 through December 31) OTHER INCOME EXPECTED IN 2021 2021 ESTIMATED Severance Pay $ Unused Sick Pay $ Unused Vacation Pay $ Unemployment Benefits $ Worker’s Compensation $ Interest/Dividend Income $ Child Support $ Social Security Benefits $ Payments to Tax-Deferred plans $ TANF/Welfare Benefits $ Other (please explain) $ Total $ 367 cedar street • new haven ct 06510 • t 203.785.2645 • f 203.436.9762 • [email protected] Y school of medicine Financial Aid O∞ce Estimated
    [Show full text]
  • Preparing a Severance/Separation Agreement
    Resource Guide Preparing a Severance/Separation Agreement The following are guidelines to consider when preparing a severance/separation agreement. Each agreement should be narrowly tailored to reflect the individual circumstances of the employment separation. Relying on “form” agreements increases the likelihood that an agreement could be found to be unenforceable if challenged in court. It is recommended that all severance/separation agreements be drafted by or with your employment attorney; however, below are issues to be aware of when preparing a severance/separation agreement with your attorney. When Should I Offer Severance? • Does the company have a formal severance pay policy/plan? • Do you routinely offer severance pay or only in certain circumstances or to employees at a certain level? • Do you have a concern that the employee may file a discrimination or other type of employment claim? Does it Matter When the Employee Signs the Agreement? • The severance agreement should be signed only after the employee’s separation date. • If the agreement is signed prior to the employee’s last day of work, the employee has not waived claims that may occur after signing but before the employee’s actual termination date. What is “Consideration?” • The agreement must offer benefits to the employee in exchange for his/her release of claims against the company – these benefits are the employee’s “consideration” for signing the agreement. • The agreement must offer benefits (consideration) to which the employee is not already entitled upon termination. • For example, if the company’s current policy is to pay out earned, unused vacation upon termination, this vacation pay is already owed to the employee and, therefore, cannot be offered as “consideration” to sign the agreement.
    [Show full text]