SEVERANCE AGREEMENTS - TWO MORE KEY POINTS
Yesterday, I posted about two key points in a severance agreement. The first point was that you need to understand exactly what you are getting and what you are giving up by signing the severance agreement. The second point explained that the money portion of a severance agreement is usually expressed in terms of salary or pay over a period of time such as "your severance pay will equal two months of your salary...." In this post, I add two more important points to be considered in evaluating your severance package:
1. Health Benefits
Your employer will be required to offer you COBRA benefits. COBRA refers to a federal law (Consolidated Omnibus Budget Reconciliation Act of 1985) that requires companies to offer health insurance to terminated employees for 18 months at the corporate rate. For example, if you currently receive health benefits that cost $500 a month through your employer, your company is required under COBRA to offer this same health insurance policy to you at the same price of $500 a month for 18 months. Many severance packages include an offer to make your COBRA payments for a period of time or simply continue your existing health benefits for a period of time and defer the start of the COBRA period. Check your severance package to see if your company has offered to either extend your health benefits or make any of your COBRA payments. Remember that you can ask your employer to help make these payments for you as part of the severance package.
2. Unemployment Benefits
If you are about to lose your job, you are probably very interested in obtaining unemployment benefits. Typically, a person is only entitled to unemployment benefits if they are laid off due to a lack of work. A person who is terminated for cause or quits is not entitled to benefits. It is not uncommon for companies to challenge a former employee’s request for unemployment benefits on the ground that the employee was fired for cause or poor performance. You can make sure this does not happen to you by including the right language in your severance package. Obtain an agreement that your employer will not contest your right to unemployment benefits. In order to do this, add a sentence to your agreement with language similar to this: “It is agreed that [You] had been laid off for lack of work (or restructuring or downsizing etc…) and that [You] is entitled to receive unemployment benefits and X Company agrees that it will not contest any claim for unemployment benefits requested by [You].”
There are several other important points that will be covered in a subsequent post.
