When a company offers a severance package, you can be torn between feeling upset about being let go and reassured by the promise of severance pay and temporarily continuing benefits. And it can feel stressful to then be asked to sign a legally binding contract designed primarily to protect the employer’s interests. Before you sign anything, it’s important to understand what these agreements are for and what your options are.
Understanding what you give up for a payout
Many severance agreements include a release (waiver) of claims and other restrictions. For example, you may agree not to sue the employer for issues like wrongful termination, harassment, or discrimination. You might also see non-disparagement or confidentiality clauses that limit what you can say about the company or the terms of your exit.
Some agreements also include non-solicitation or non-compete clauses. Read these carefully. If they’re too broad, they could limit your ability to work for a competitor. In Michigan, non-competes may be unenforceable if they don’t protect a legitimate business interest or are unreasonable in duration, geographic scope or the type of work covered.
Federal protections for workers over 40
The Older Workers Benefit Protection Act (OWBPA) provides specific safeguards for employees aged 40 and older. If you fall into this category, federal law mandates that you receive time to weigh your options if the agreement includes an age-discrimination (ADEA) waiver. Here are the timeframes required by federal law:
- Individual layoffs usually give you 21 days to think about the offer
- Group layoffs require a 45-day period to review the terms
- You have 7 days to change your mind after you sign
These periods allow you to assess your situation and consult with a professional to ensure the deal is fair before it becomes final.
Negotiating terms and handling unemployment
Many employees assume the first offer is final, but there is often room to negotiate for better terms. You might ask for extended health insurance coverage or a neutral reference for future employers.
Regarding Michigan unemployment, a severance payment can sometimes delay your benefits. The Michigan Unemployment Insurance Agency looks at whether it counts as wages/remuneration and whether it’s allocated to weeks after separation, which can affect timing.
Final thoughts on your agreement
Understanding the contents of a severance agreement can be crucial as you assess your next steps. By reviewing the specific clauses and considering your leverage, you can make a choice that supports your long-term goals.