Lookout for Severance Agreement Gotchas

Before you sign your severance agreement you should ensure that all of the details in the agreement are true and accurate. For example, you may be entitled to unused vacation time or a final paycheck. Make sure these details are included in the agreement. Once you sign the severance package it will be significantly harder to make changes and get what you’re owed. In the event that the severance agreement says that you’ve already been paid everything that you’re entitled to, check to make sure that’s accurate as well. Also, if the agreement says that you have returned all of the company property that has been lent to you, make sure you really have returned it.

The last thing you want is for your former employer to take action against you because you failed to return a piece of equipment. Also, it’s important to be diligent in accounting for your unused vacation days. If you sign the contract and they’re not included in the agreement, you’ve effectively forfeited those days and you’ll have very little legal recourse in getting the money back that you’re owed.

What Cannot Be Waived in a Severance Agreement?

Both unemployment and Workers’ Comp cannot be waived in a severance agreement. However, you can say “I don’t have any Workers’ Comp claims” in a severance agreement. Later on, if you decide to file a Workers’ Comp claim, you may have action taken against you for making false statements so that you would get a severance package. This is especially true if you have a known injury when you sign the severance package. So it’s important to note that while you can still file a Workers’ Comp claim later on, you should carefully read and negotiate revisions to the agreement before you sign it. That way you can ensure that it’s accurate and allows you maximum flexibility.

When it comes to unemployment, in some situations you may be able to negotiate a clause which states that an employer will not put up a fight (or much of a fight) when it comes to your application for unemployment. However, obviously an employer cannot agree to lie. This is common sense but it’s a question that still manages to get asked by some people.

Also, it’s important to keep in mind that while you cannot waive unemployment, it may be affected by your severance pay. There are a couple of legal tricks to getting around this problem. However, it’s important to note that you shouldn’t count on getting immediate unemployment benefits, as a severance package payout may delay or even disqualify you from receiving unemployment benefits.

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What about COBRA Benefits?

Eligibility for the COBRA program is not determined by whether or not you sign a severance package. While it’s still possible to get your employer to cover some health premiums, the reality of the situation is that COBRA is less important now because pre-existing conditions are less of a concern today. However, you may decide that you want COBRA coverage if you’ve already met your deductible for the year or if you have any other reasons. The problem is that you’ll pay dearly for it. Most people who see their COBRA premiums are shocked when they learn how much they’re going to cost.

Your Severance Package and Your Retirement Plan

If you’re close to vesting, and words like defined benefit, defined contribution, pension, etc. are coming to mind, you might want to pursue a different option. You might want to speak with your employer and see if they’ll consider putting you on a leave of absence, with pay, until you vest so that you can collect these additional benefits. If you’ve been with the company for years and have done good work, they may be open to this type of agreement so that you can get all of the benefits that you’re entitled too.

Collecting Your Final Paycheck

A common statement from the HR department is that “You can collect your final paycheck once you’ve returned all company property”. However, this isn’t really the truth. You’re entitled to your final paycheck regardless of work done or company property not returned. In fact, there’s no reason why your employer can withhold your final paycheck. It would be illegal to do so. That being said, it’s still always a good idea to return company property. If you don’t you may find your former employer taking action against you at a later date, which is definitely not something that you want.

If you’re hesitant to give up company property because of how much you value it, you can always try to negotiate a severance package that allows you to keep company property. Your employer may be willing to agree to this because it’s a win-win situation. You get to keep something that’s valuable to you and your employer doesn’t have to dish out as much in severance pay. While not all employers will agree to this arrangement, some will and it’s worth negotiating for if there is a piece of company property that you’re particularly attached to.

What Rights do Independent Contractors Have?

Unfortunately, independent contractors cannot file wage claims. If your boss refuses to give you money owed, then you can take them to small claims court to try and win back what you deserve. However, this is often a tedious process and it may not be worth the time spent just to recover one last paycheck. There is an exception though. If you can prove that you’ve been called an independent contractor to save your boss money, but you really do the work of a full time employee, you may be able to go to court to win rights that will allow you to collect back pay and unemployment. Since independent contractors are rarely entitled to severance packages or other benefits upon termination, this may be the best bet if you want to secure benefits while you’re looking for a new job.

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