Most employees in Michigan are considered to be “at will”, meaning they can be terminated at the will of the employer. For these employees, there is no legal obligation to offer a severance. So why do employers sometimes present a severance package to an employee they have just fired?
Which common circumstances do Michigan employers offer severance packages?
There are three common reasons employers may offer a severance package to their terminated employee.
Goodwill to employee
The first is goodwill. An employer may wish to help soften the blow of sudden employment to a valued, long-term employee, especially if there are no serious performance issues or misconduct, or where the termination is the result of a restructuring, merger, or other corporate decision. Essentially, it’s a way to convey, “We don’t have to do this, but thank you for your service.”
Legality of the employees’ termination
The second is because the employer recognizes that the employee may have a legal claim. When there is strong evidence of discrimination, illegal harassment, whistleblowing, or retaliation for protected activity, an employer may present a severance offer to minimize its legal exposure.
Performance based termination
The third, and perhaps the most common, is when an employee is terminated for performance, for cause, or just being a bad fit. In such cases there may be no viable legal claim, but the employer is still willing to offer a severance so they don’t see the employee in their “rear view mirror,” so to speak, occupying their time and resources dealing with a suspect claim. At the same time, there may be an element of goodwill in offering severance to help such employees cope with the loss of their job.
Are severance offers negotiable in Michigan?
When you receive any type of severance offer, you should contact an attorney. Negotiating severance packages is a particular specialty of Roumel Law. When we consult with an employee who has been presented with a severance package, we generally do the following:
- Gain a thorough understanding of your employment history, leaving no stone unturned to determine if you have potential legal claims.
- Review the severance proposal and make sure you understand what each provision means – not only what is in the proposal, but what is not and perhaps should be included, or made mutual.
- Understanding common provisions such as preambles, waiver of claims, non-disparagement, reference, and confidentiality.
- Reviewing the consideration or compensation offered, whether in payroll continuation, lump sum payment, benefits continuation, entitlement to future bonuses or commissions, stock options or other investment units, and whether “vesting” of unripe units may be accelerated.
- Determining whether “onboarding” agreements you may have signed are still enforceable after you sign a severance agreement, such as confidentiality, non-compete, and non-solicitation provisions.
- Advising how to explain the job loss in applications and in job interviews.
- Whether, and when, you may be eligible for unemployment compensation.
- Negotiating points, and options going forward including whether to negotiate, accept, or reject, and consider litigation.
If you hire Roumel Law to negotiate your severance agreement, we will reach out to the appropriate contact, whether Human Resources, in-house counsel, or an outside attorney. Since severance proposals typically advise you to obtain an attorney’s advice before you sign, there is no reason why the employer will be offended or hold it against you that you’ve hired counsel.
In what ways can an employer respond to severance package negotiations?
All types of severance offers are negotiable, to some degree, but we can never predict the employer’s willingness to engage in discussion. Generally, three things can happen.
- The employer will say, “this is our offer, take it or leave it.”
- The employer may be willing to negotiate non-economic terms, such as language issues, but be resistant to changing the economic package.
- The employer may be willing to negotiate both economic and non-economic terms. This is most likely where an employee has a meritorious legal claim.
There is a fourth possibility that is extremely rare and we have not yet encountered it, but that is where an employer withdraws or reduces the severance offer after you attempt to negotiate. We view that as potentially illegal retaliation for your exercise of legal rights, but some attorneys report this has happened.
Nonetheless, we believe that the benefits of seeking to negotiate a severance package can be significant, and far outweigh not doing so. Moreover, the entire process can be concluded in a matter of weeks.
When you contact Roumel Law, we can schedule a consultation to review your severance proposal and outline your options as explained above. If you hire us beyond that to negotiate, we offer flexible retainers, including contingency agreements of the amount we obtain over and above your severance offer. We believe that hiring Roumel Law will be an investment in your future, rather than an expenditure that you can’t afford.
If you have experienced the loss of your job and been presented with a severance package or severance proposal, we look forward to being part of your support system, and to helping you minimize the economic impact of your loss of income, and minimizing the harm to your career.
