Separation Agreement

Several decades ago, it was commonplace for employment relationships to last for the entirety of an individual’s career and end with the fruits of a pension plan and well-wishes from colleagues at a lively retirement party. While many executives, managers, and other employees still stay with the same company until the end of their careers, it is now certainly the exception rather than the rule.

For reasons that may be specific to the employee or because of broader economic and strategic factors, companies and their executives and employees decide to part ways on a regular basis. Often, these decisions catch the employee off-guard and lead to feelings of resentment, unfairness, and betrayal. It can also create worry and anxiety about the immediate and long-term financial future.

Employers Owe Employees Nothing. But Employees Deserve A Lot More.

If an employee is approaching the end of his or her employment relationship – whether by mutual agreement or otherwise – an employee will want to close this chapter in his or her career with as much security and consideration as possible. After all, the employee has likely put in years of hard work and sacrificed a lot serving the company with loyalty and commitment. It is not unreasonable to expect the employer to show some respect and gratitude for the employee’s efforts in the form of a generous severance package.

However, unless an employment contract or collective bargaining agreement states otherwise or the employee was wrongfully terminated for reasons prohibited by law, the soon-to-be former company owes the employee nothing. There are no severance package laws in Rhode Island–no legal requirement that an employer provide an employee with weeks or months of severance pay or other benefits (COBRA aside).

This means that securing severance pay and maximizing the benefits of an exit package for an employee and his or her family will be a matter of negotiation. An employer likely negotiates severance matters on a regular basis, advised by high-paid lawyers who will propose and draft agreements purposefully skewed in the company’s favor. It may also appear that the company is holding all the cards; after all, the employee is the one asking for compensation and other consideration.

Employees should not make the mistake of trying to level the playing field on their own or presume that they need to take whatever the company offers, no matter how inadequate. Negotiating is a skill and an art. At this law firm, we bring a wealth of knowledge and savvy to severance negotiations, focusing on each client’s unique circumstances and goals. Obtaining desired results at the end of an employment relationship requires much more than writing a demand letter or making a phone call or two. Negotiations need to begin with a holistic, well-thought-out strategy that takes into consideration the company’s pressure points, followed by the development of an approach designed to leverage those concerns in a positive way.

Considerations for Exit Package Negotiation

While Rhode Island laws do not generally require an employer to offer their employees severance packages upon termination of the employment relationship, an employer frequently will make such offers, even if it is not because of the kindness of their hearts.

An employer will often consider a former employee’s circumstances on a case-by-case basis when determining whether to offer any type of severance pay. Many factors may affect the employer’s decision regarding severance, such as the former employee’s record with the company, the length of employment, and the circumstances of the employee’s departure.

While an employer may offer an employment separation agreement as a gesture of goodwill, many offer severance for more self-serving reasons. A severance agreement can act as an insurance policy of sorts to insulate the company from liability arising out of the employment relationship. In exchange for extended compensation and benefits, a severance agreement may require the employee to release any potential claims he or she has or may have against the employer. In addition, a proposed severance agreement might impose new obligations on the former employee, including a promise from the former employee to refrain from certain work or activities.

It can be tempting to agree to such terms when the options seem to be take it or leave it. But if an employee signs an agreement that takes away certain legal rights or puts restrictions on the employee’s ability to pursue the next chapter of his or her career, the employee could be giving away much more than the employee receives in severance pay. Quite simply, negotiating a severance package is not something an employee should do alone, and an employee should never enter into such an agreement without first speaking with experienced employment counsel.

If you or someone you know needs assistance reviewing, negotiating, or drafting a separation agreement, please contact us to discuss your matter.

Practice Areas