Six Key Points to Consider when Reviewing a Severance Agreement

Source: This entry was posted in Severance Pay on June 30, 2013 by Robert Ottinger.

1. What is the payout schedule? Many companies will propose a payout in 30 or 45 days after execution of the agreement. There is no reason to wait that long and companies will often shorten the payout date to 10 or 15 days upon request. Also, companies often propose a payout over time that basically keeps you on the payroll for a period of time. A Lump sum payment is preferable because you get all of the money immediately. Payouts over time can be disrupted if something comes up – avoid these potential issues by getting a fast upfront payout.

2. Are outplacement services offerred? If so, determine if you need those services. Most people do not want them anymore. If you don’t need those services, ask to have the cash equivalent.

3. Are the payments subject to a mitigation offset? For example, if you get a new job within a certain time frame, are you required to pay back an amount or have the payments reduced? Obviously you want to avoid any offsets if you find a new job. If an offset clause is included in your agreement, ask to have it removed. Companies usually agree to do this. The point of a severance package is to end the relationship so why create new ties.

Here is a clause that covers mitigation and offsets:

“The Executive is under no obligation to seek other employment and there shall be no offset against any amounts due to her on account of any remuneration or benefits provided by any subsequent employment she may obtain.”

4. Is there any money owed to you that is independent of the severance package? For example, are expense reimbursements owed or a pending bonus? These payments should be recognized in the agreement. If you know that certain expenses are due, run a report and show it to your employer so the amount owing is known and if any questions arise, try to solve them immediately. Also, if an accrued bonus is due, make sure you put up a good fight to get the bonus paid. The bonus is not part of the severance if it has already been earned. Companies often try to exclude bonuses.

Here is a clause that covers any unreimbursed business expenses:

“Within 15 days of the Separation Date, the Company shall pay to the Executive any expense reimbursements due to the Executive as of the Separation Date pursuant to the applicable plan, program or practice of the Company.”

5. Benefit Continuation. If the company has offerred to continue your health insurance, will this be accomplished by continuing the existing insurance plan or by COBRA reimbursement? This should be set forth clearly in the agreement. If the company has not offerred to extend benefits, you should ask them to do so. Ask to have the benefit continuation mirror the severance period (if the severance offer is 4 months ask for 4 months of continuing health insurance).

6. Job Reference. What type of reference will the company provide to you? If they will agree to a letter of reference, have the letter prepared and attach it to the agreement. Or if a letter cannot or will not be prepared, set out the terms of the reference in the agrement as in this sample.

“The Company agrees to supply a neutral reference letter that includes the Executives title, dates of employment, salary and the reason for separation as resignation.”

Business forum: HR and the same-sex marriage act

Source: Star Tribune 

Author: Sara McGrane, employment law attorney with MInneapolis law firm Felhaber, Larson, Fenlon & Vogt. 

The impact of same-sex marriage goes beyond the ceremony to employee benefits. Minnesota companies are advised to take note.

While the passage of legislation to legalize same-sex marriage in Minnesota has advocates celebrating, the future walk down the aisle won’t be completely covered in rose petals when it comes to equality in company-sponsored benefits.

In fact, differences in the way the federal government and the state define marriage has several implications for businesses as they determine how the Minnesota statute will affect their benefit programs.

With the new law taking effect Aug. 1, and a ruling expected this summer by the U.S. Supreme Court on the Defense of Marriage Act (DOMA), a lot is still undecided. In the meantime, here are a few guidelines that can help employers as they evaluate the change to Minnesota law.

Consider state and federal laws when determining benefit policies. Minnesota is the 12th state to legalize same-sex marriage. While some states are making it easier for couples to recognize the unions, there are still hurdles at the federal level when it comes to employee benefits because the U.S. government defines marriage as a union between two individuals of the opposite gender.

The U.S. Supreme Court is currently debating a case relating to DOMA, which denies married same-sex couples a range of benefits that are available to heterosexual couples.

When determining benefits policies in Minnesota, companies first and foremost need to follow all federal laws that have no state equivalent. For example, employee benefit plans covered by ERISA (Employment Retirement Income Security Act) do not change. Benefits that remain federally mandated include Social Security benefits, pension plan benefits, spousal immigration rights and income tax benefits.

In the case where a law has both a state and federal statute on the same topic, or only a state law, protections will now extend to the same-sex spouse. For instance, employers required to provide 12 weeks of unpaid leave for an employee with a serious medical condition, or to care for a spouse or close family member under FMLA (Family Medical Leave Act), need to extend those protections. Minnesota has state FMLA provisions and employers are required to provide those benefits to the same-sex spouse.

When evaluating any benefit policy, employers should consider whether they operate in a state that recognizes same-sex marriage. Employees living in states recognizing same-sex unions should have those state law benefits extended to them.

Review human resource policies. The upcoming change to Minnesota law makes this a good time to audit human resource documents to update policies and practices that previously applied to married employees so they can be worded to apply equally to same-sex married couples. Employers should review new employee forms, benefit forms and other documents to make sure they are gender-neutral in relation to identification of marital status and spouse.

Businesses should also update personnel policies that relate to state protections, such as FMLA, to include options for same-sex couples. This includes reviewing policies and procedures to ensure that the same requirements are being applied to both same-sex and opposite-sex couples for the purposes of establishing benefit eligibility.

In addition to recognizing same-sex unions, Minnesota has a Human Rights Act that protects individuals on the basis of their sexual orientation. If they haven’t already, businesses should review employee manuals and policies to ensure they are not discriminatory on the basis of sexual orientation.

Provide leadership training. With any statutory change, it is a good idea for employers to provide training for supervisors and managers to ensure fairness and equity in their treatment of employees. Issues to be discussed include providing insight into the rights and obligations of same-sex couples. All managers should be educated about employee benefits, such as medical leave laws, that apply to same-sex couples.

While the Minnesota law to legalize same-sex marriage will bring changes to company policies, we should also receive additional clarity at the federal level once the U.S. Supreme Court announces its decision on the case involving DOMA.

Once that is established, the walk down the aisle may offer more rose petals for couples as well as a clearer solution for businesses.

Happy Independence Day

Happy Independence Day weekend everyone! Bertelson Law Office wishes you relaxing long weekend! 

On a day when we give thanks for the liberties fought by the first generation of Americans, we think about the freedom they were seeking. In addition to the pursuit of a better life in the New World, we think of those similarly pursuing better conditions in their workplace and reaffirm our mission to serve employees with strong advocacy, extensive knowledge, and a commitment to personal service.

Contact Bertelson Law Office if you are looking for legal advice about your workplace situation.