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Severance Package

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  • May 16th, 2017 11:25 pm
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[OP]
Newbie
Aug 19, 2012
59 posts
4 upvotes
Toronto

Severance Package

Are there any good threads here to answer questions about severance packages? Is there anyone here who has experience negotiating a severance package? Thanks.
12 replies
Deal Guru
Dec 31, 2005
13129 posts
651 upvotes
Talk to a lawyer.

There are many factors that go into severance. At first I thought my severance was low, but lawyer confirmed it was lump sum with ni conditions...the alternate was a severance that was 10-15 percent higher but paid monthly and stopped when I found a job.
Lots to consider.
[OP]
Newbie
Aug 19, 2012
59 posts
4 upvotes
Toronto
nalababe wrote:
Apr 8th, 2017 11:24 am
Talk to a lawyer.

There are many factors that go into severance. At first I thought my severance was low, but lawyer confirmed it was lump sum with ni conditions...the alternate was a severance that was 10-15 percent higher but paid monthly and stopped when I found a job.
Lots to consider.
nalababe,

Thanks for the reply. I have already retained a lawyer, but I am unsure how to proceed.

I was employed with the company for 12 years and they offered 7 months paid monthly with no clawback. We have countered with 13 months lump sum (based on the 1 month per year of service rule of thumb, age, availability of work, etc.) and they countered back with 8 months paid monthly.

My lawyer recommends we counter back with 9 or 10 months paid monthly. My issue is my employer's counter said "final offer" but my lawyer thinks it is a bluff and they will continue to negotiate to avoid court. I want to counter one more time, but l don't want to lose the offer and go to court.

How many counter offers are normal in severance negotiations? How likely is it that my employer will stop negotiations after one counter?
Last edited by thegoalie31 on Apr 8th, 2017 12:10 pm, edited 1 time in total.
Member
Oct 4, 2008
238 posts
14 upvotes
thegoalie31 wrote:
Apr 8th, 2017 12:10 pm
nalababe,

Thanks for the reply. I have already retained a lawyer, but I am unsure how to proceed.

I was employed with the company for 12 years and they offered 7 months paid monthly with no clawback. We have countered with 13 months lump sum (based on the 1 month per year of service rule of thumb, age, availability of work, etc.) and they countered back with 8 months paid monthly.

My lawyer recommends we counter back with 9 or 10 months paid monthly. My issue is my employer's counter said "final offer" but my lawyer thinks it is a bluff and they will continue to negotiate to avoid court. I want to counter one more time, but l don't want to lose the offer and go to court.

How many counter offers is normal in severance negotiations? How likely is it that my employer will stop negotiations after one counter?
depends on employment conditions, are they closing shop? or are they just closing your department, if they are closing shop, take whatever you can. also depends on your employment contract.

they probably probably prefer not going to court just as much as you. Stopping negotiations is never a smart idea as it does not go well in courts, if they have proper legal advice, they probably wont stop negotiating.
[OP]
Newbie
Aug 19, 2012
59 posts
4 upvotes
Toronto
cmhyt wrote:
Apr 8th, 2017 12:33 pm
depends on employment conditions, are they closing shop? or are they just closing your department, if they are closing shop, take whatever you can. also depends on your employment contract.

they probably probably prefer not going to court just as much as you. Stopping negotiations is never a smart idea as it does not go well in courts, if they have proper legal advice, they probably wont stop negotiating.
cmhyt,

Thanks for the reply. They are a large company restructuring the department. Given my 12 year tenure l believe there is still room to negotiate. I don't believe they are currently consulting with legal - just senior management making decisions. I trust my lawyer, but I'm just curious for some other opinions before l make a decision.
Newbie
Mar 5, 2017
11 posts
1 upvote
Will the lawyer go on contingency? If yes, I'd counter the offer because worse comes to worse, you can request legal fees to be included should you end up in court. Kind of like, "They wasted everyone's time. They should pay for my lawyer's legal fees as well as the full sum." Maybe that's a different approach you could consider?
Deal Guru
Dec 31, 2005
13129 posts
651 upvotes
The one month idea isn't anything if substance. When the lawyer did a search of comparable decisions for like role, Age, seniority.... what was udentified.

When we looked at historical awards the offer we had been given was pretty close...and it wasn't 1 month per year.

As far as legal fees, you can ask (we did) it was rejected.
Deal Addict
Oct 18, 2004
3044 posts
284 upvotes
Wat
3 weeks for every year is more the norm, no? Which in your case would be 8.3 months.
[OP]
Newbie
Aug 19, 2012
59 posts
4 upvotes
Toronto
nalababe wrote:
Apr 9th, 2017 4:03 pm
The one month idea isn't anything if substance. When the lawyer did a search of comparable decisions for like role, Age, seniority.... what was udentified.

When we looked at historical awards the offer we had been given was pretty close...and it wasn't 1 month per year.

As far as legal fees, you can ask (we did) it was rejected.
Based on my situation, my lawyer said similar cases have been awarded 13-14 months in court. 8-9 months is the low end and 10 months should be the minimum out of court settlement.

At this point, I'm thinking of one last counter at 10 months. I agree with the post above that a large company will likely want to play ball and avoid court as long as the ask is reasonable.

We are not asking for legal fees at this point unless it goes to court, in which case we will request full reimbursement of fees in the lawsuit.
Penalty Box
Oct 13, 2016
144 posts
7 upvotes
What kind of negotiation are you referring to?

I did once three years ago. Basically, it is larger scale layoff, where my package is slightly worse than some local employee. I just threatened to look for a lawyer, they just revised my package to be the same as others.

If you feel that you were discriminated in the package by race/country of birth and gender, it is fairly easy and sometimes no need to hire a lawyer.

If others, suggest you to hire a lawyer. But reasonable lawyer usually ask for a profit sharing type of contract. You don't need to pay any upfront fee. You need to sign non-disclosure and non-competing clause in the agreement though.




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thegoalie31 wrote:
Apr 6th, 2017 10:11 pm
Are there any good threads here to answer questions about severance packages? Is there anyone here who has experience negotiating a severance package? Thanks.
Deal Addict
Apr 21, 2014
1042 posts
244 upvotes
Alberta
nalababe wrote:
Apr 9th, 2017 4:03 pm
The one month idea isn't anything if substance. When the lawyer did a search of comparable decisions for like role, Age, seniority.... what was udentified.

When we looked at historical awards the offer we had been given was pretty close...and it wasn't 1 month per year.

As far as legal fees, you can ask (we did) it was rejected.
I was with a public company and worked there for 4 year and 11 months, when the price Of gold tanked and regional office was closed. I was 32 at the time, and they initially offered 12 weeks, went with a demand letter from an employment lawyer and they upped the offer to 16 weeks and payed up to 2k for my legal fees (legal fees were less than that, so didn't pay a cent). Both offered were without any payback if I got another job, but as mentioned it is within their right to do so. Which worked out well because I ended up finding a job making 23k more during the negotiation process and started 9 days after my last day.

I had bad luck with that employer, as they were taken over a short time after I started with them and was let go 8 months later (a few people layed off almost every week!). I guess they didn't want any lawsuits because they offered 9 weeks severance even though I was only there for 8 months. Again with no conditions.

My lawyer charged hourly. Think the total bill was $1700 or something like that.
Member
User avatar
Aug 30, 2012
274 posts
75 upvotes
Montreal
out of curiosity, where did you work that the regional office was closed when Au tanked?
Deal Addict
Mar 24, 2005
1351 posts
106 upvotes
Interesting topic - i'm rarely on RFD but consider myself very knowledgeable in many career topics; used be a regular poster on this forum but now my job and family takes priority. Anyway, maybe it's too late to comment but for those who are interested about this topic, I'd like to weigh in my 2 cents and clear up some misconceptions on this topic.

First, there is no "rule of thumb" of 1 month for every 1 year of service. You can call it a best practice but cannot be used as the measuring stick. The only guarantee of a measuring stick is the rules that are set by the Ontario Employment Services Act which pretty much states 1 week for every 1 completed year of service (there's also a fractional calculation for an incomplete year that you can add on top) - however this is the statutory minimum only. There used to be a 5 year mark where the scale changes but that was removed a couple of years a go.

Now, when you are let go, never sign a severance package when you are let go - even if they pressure you and even if there is a deadline. You should always try to deal directly with the HR contact person - you need to show that you have made every attempt possible to resolve this issue if it goes to arbitration or court. You do this by writing a letter stating what you require for severance and the rationale for it. Don't worry if you pass the deadline it just means they have to make another offer to you as they are required to do so. But it would be good to respond before the deadline to show your urgency. Now the reality is, this unfortunately rarely ever works but you have to go through the motions of attempting to resolve this. From this point on, you would have to seek legal advice - there are many lawyers that offer free consultation services so you can get some legal opinions about your situation. But the first thing I would do is get a demand letter drafted - which basically means you now have a lawyer representing you and will be seeking legal action if necessary. This sometimes works and it doesn't cost a lot to you to get a demand letter drafted. Some companies will cave at the first sight of you showing legal pursuit. However, this has nothing to do with size of company or how reputable it is. Regardless of size of company, it does not mean they will always play ball. Even large organizations will not always play ball. The fact is, your company (or former company) has all the time in the world and for those who don't play ball, they will play the wait it out game... you on the other hand have financial obligations, out there looking for a job, need to support yourself and your family. Meanwhile, they will reschedule meetings, take a very long time to reply back, and delay the process as much as possible. And they're hoping for you to give up or find a replacement job and then give up because then you can't get your severance anymore. So it's a fine balance of how much you want to pursuit vs taking what you can get.

In terms of "how much" severance, there is so many factors involved, such as number of years, the seniority of the position, your age, the availability of work in your field, etc. Speaking to a lawyer, they have access to what have been awarded from court settlements. However, this is not a good gauge either. First, it's rare that most cases would reach court and the majority of severance disputes are resolved outside of court through arbitration/negotiation. The ones that make it to court are skewed because those are usually for unfair dismissals, etc.... but it's not clear what those awards were given on. And secondly, you can only dream of getting that kind of severance if you took it all the way to court. Out of court settlements are obviously going to be a much lower amount - dont forget, those court settlements also involved heavy legal fees so your net severance pay is a lot less - companies know this too so when you're negotiating before going to court, usually the settled amount is significantly less. So consider the lawyer costs involved when considering whether you want to take it all the way to court.

When considering the trade off between how much you're willing to battle vs. how much a company will offer... i think if you can squeeze more than their original offer you're already in good shape. Squeezing a little extra may not be worthwhile considering the lawyer costs involved - but it depends on how much you were making too.

Oh, and when they say it's final offer - that's just a bluff strategy. It's their final offer which is true... but all that means is they have to make you another one - which could be the same amount.

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