Category Archives: Employee Tip – Severance & Settlement

Areas of Law That Could Relate to a Severance and/or Job Termination

If your employment has been terminated and you have been offered a severance agreement, many areas of law could potentially be involved with your situation.  An employee rights attorney who reviews a severance situation will have a mental checklist of such laws to consider.

Those laws generally include: (1) contract law; (2) laws that make certain job-terminations unlawful, e.g. various Federal and State discrimination laws, whistleblower-retaliation laws, “wrongful discharge” laws, etc.; (3) wage laws that govern severance pay or payment of residual unpaid wages from employment such as commissions, bonuses, overtime, deferred compensation, etc.; (4) laws that govern employer-provided benefits such as health insurance coverage, 401k or pension benefits, etc.; (5) laws involving State benefits such as unemployment benefits or workers compensation benefits; and (6) laws pertinent to post-employment actions such as searching for or starting new employment, e.g. laws governing non-compete agreements, trade secrets, defamation, or privacy that prohibit a former employer or employee from undertaking certain actions (e.g. working with certain competitors to a former employer) or making certain kinds of statements (e.g. disclosing proprietary information, making false and reputation-damaging statements), etc.

Each of the general areas above has many sub-categories and nuances. For example, “contract” law involves not only a review of language in formal contracts between a worker and employer, but knowledge of external laws such as State statutes and court decisions that set forth how certain contract principles should be interpreted.  Also, sometimes a given document or spoken agreement that a worker may think is not a contract– e.g. a commission or bonus “plan”, a handbook provision, etc.– can in some instances be considered a contract by a legal authority.

A worker who is presented a severance agreement will not, unless he or she is an employment attorney, be aware of all the laws above and their potential legal rights or responsibilities.  Yet, a severance agreement, once signed, typically waives the worker’s rights to pursue legal claims under most laws.   All too often, workers sign severance agreements that waive legal rights without knowing beforehand what all their legal rights are.  Relatedly, it is common for workers to waive rights that had potentially significant value.

This post has hopefully given an overview to help “know what you don’t know”, so to speak.  Only an employment attorney could give an informed assessment of actual potential legal claims and rights. If such an attorney is willing to consult with you at no charge (and many employee-rights attorneys do in fact provide free initial phone calls, myself included), I see no downside to having the attorney review your situation and potential legal rights above.  In those instances an attorney finds potential legal rights with significant value, often a severance can be negotiated and/or successful legal action can be pursued with an outcome better than the initial severance offer.  Employers typically have the assistance of employment attorneys in drafting severance agreements and evaluating laws at issue, including those above.  So learning more about your own potential legal rights can help even the playing field, so to speak.

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Video: WI Shareholder Rights, 5 Factors to Consider

If you are a shareholder or executive in Wisconsin and have a business-  or employment- related dispute, this video by blog author Michael Brown of DVG Law Partner may be of assistance.

The video covers five factors to consider in a shareholder and/or employment dispute:

WI Shareholder Video Pic-Link

You can also click this article link if you would like to learn more about shareholders’ legal rights.

For a free case evaluation, please contact attorney Michael Brown at 920-757-2488,  mbrown@dvglawpartner.com or www.dvglawpartner.com/contact-dvg-law/.

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Mean and Median Settlement Values of Employment Discrimination Cases

According to a study of employment discrimination settlements that occurred in 1,170 cases settled by federal magistrate judges in Chicago over a six-year period ending in 2005, “The mean settlement amount is $54,651 … and the median is $30,000.”  These numbers applied for single-employee litigants, as opposed to class-action figures, which are higher.

Perhaps the numbers above differ from your assumptions.  What should these values mean to you, if you are an employee who is considering, or has taken, legal action against an employer?   One thing they do not mean is that the numbers provide a value for your matter.  Before assuming the value of your case, you should consider many factors.  Such as:

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Are You a Manager Given a Severance Agreement? Learn the Risks of Trying to Manage Negotiations

In my job as an employee rights attorney, I’ve encountered thousands of situations where fired workers contacted me about severance agreements they were presented.  In some situations, I have found such workers had strong potential legal claims and strong leverage to negotiate better severance terms and higher payment.  Generally speaking, fired managerial, executive and professional workers have better opportunities for severance improvements than do non-managerial workers.

There are many common reasons for this.  One reason is that employer companies often believe (often correctly) that manager-level workers have important knowledge, i.e. knowledge about the company’s employment and severance practices, about sensitive factual circumstances that give rise to potential legal claims, etc.  Further, if the fired manager retains an attorney with employment-law know-how (which can then be applied to the factual circumstances at issue), the employer knows it faces a credible threat of legal action and exposure.  The employer thus treats that manager/attorney combo more seriously and reasonably in negotiations as compared to the fired employee who does not have an attorney yet is making statements about how she or she “could” get an attorney and sue for [insert misdiagnosed legal claim], etc.

Surprisingly, I see some managerial- level workers who– despite their general advantages above– make the mistakes I mention above. By attempting, on their own, severance negotiations and related legal diagnoses and communications, they had squandered opportunities for a better severance. It is unfortunately common for such a manager to call me, after he or she has had negotiations go south, and report to me their assessment of the laws and leverage points that apply (with no request for my assessment or whether I agree), and express surprise things didn’t go well. Then I begin the discussion of my evaluation. Almost 100% of the time, the main potential legal claims and leverage points I assess are completely different than what the manager assessed.

The question that has repeatedly come to my mind is this: why do managers who have a lot at stake with a severance try to manage something with which they have no experience (i.e. a discharge situation requiring assessment of hundreds of potential legal issues, litigation rights, legal forums, etc., for which they had no prior education or experience)?  My theory is that managers are used to getting things done, i.e. successful project management, and approach the severance negotiation like any other project that they are qualified to handle.  The problem is that managers — along with every other person who is not an employment-attorney– are not qualified to handle severance negotiations. Even those managers who routinely deal in negotiations do not have the skill set to handle their own severance negotiation.

Why do I say this?  Because knowing your actual leverage for a severance requires diagnosing the correct potential legal claims.  Many managers who initiate severance negotiations assume they have correctly diagnosed the best potential legal claims and leverage points.  But the vast majority have their diagnoses wrong. So long as those wrong diagnoses are not shared with the employer or used in attempted negotiations, they can be corrected. If a worker calls me before he or she attempts negotiations, I have an opportunity to discuss with them the facts and evidence — which are all that I need. Then I can assess those facts under the hundreds of employment laws I am familiar with, correctly identify the best potential legal claims (or lack thereof), and help negotiate a better severance when I feel that’s possible. Along the way, I discuss my thought process with my client, get his or her feedback and questions, and make sure we’re on the same page.

If you are a manager presented a severance agreement, and you are about to attempt negotiations on your own, take pause for a moment.  (Of course, don’t pause beyond any deadline!).  Do you really know the laundry list of potential legal claims to examine? Do you really know what your best potential legal claims and leverage factors are?  Do you really know, if you didn’t reach a reasonable severance, what options (and legal players, forums, risks, etc.) would be in front of you?  Do you really know the potential legal value (damages) of potential legal claims?  It’s okay to admit you don’t know.

We all encounter projects outside our knowledge base to manage.  I myself am incapable of managing a plumbing project (even a minor one), and, knowing that, I find someone to do that, saving myself hundreds of dollars I’d cost myself by botching the job (and creating more expense later).  If a manager botches severance negotiations, he or she could squander thousands of potential dollars, depending on the situation.

So please consider contacting an attorney, whether it’s me (in my admitted self-interest) or another employee rights attorney. If you do, it is exceptionally likely that you will hear evaluations of laws and leverage — maybe good news, maybe bad–  that you had never considered before or that are the polar opposite of something you had believed before. When I have had the opportunity to talk through misunderstandings, the discussion usually ends with everything understood, and me on the same page with the inquiring manager. And in many instances, we have agreed on a great game plan to reach a successful outcome in severance negotiations and/or litigation and in fact accomplished just that.

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Playing the Wrong Cards in Severance Negotiations

It is common for employees (including professional and executive employees) to play the wrong cards, so to speak, during severance negotiations.  That is, employees negotiating severance agreements often raise issues to their employers that they believe, incorrectly, provide strong leverage or potential legal claims.  Don’t get me wrong.  Many employees who are fired and/or approached with a severance agreement do in actuality have potential legal claims that could provide strong leverage in severance negotiations or litigation.  Sometimes it takes me a few hours of discussion to identify such material legal issues and evidence, but they’re often there.  The problem is, most employees who have winning issues fail to recognize what those winning issues are.  And in their negotiations with employers, they commonly focus on issues that seem to be winners from a common-sense perspective (or workplace-observation – or Google-search- perspectives), but are in fact issues the employer’s employment lawyer or HR rep would quickly deem useless in the legal world.

Most employers involved in severance negotiations get the assistance of representatives who have repeat experience with scenarios and litigation relating to job terminations and severance agreements.  They are adept at diagnosing issues that could present legal exposure to the employer.   Are you?  If you think you’re playing a winning hand, but the employer sees the hand is in fact a dud, you may want to have an employee rights attorney review the hand before you set it down.  If a proposed severance agreement’s terms are acceptable, of course, there is no need to show anyone any cards.  In the end, it’s better to show an employer no cards than bad cards.  Bad cards do not leverage better severance terms and may invite negative reactions from the employer that make you worse off.  If you think you may have good cards (i.e. potential legal claims with strong merits), consider checking if an experienced legal representative agrees before you share those views with the employer.

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Asked to Resign– Should You Do It?

Have you been asked to resign your job?  Told it will be “better for you” if you do?  The employer may list potential benefits of resignation, such as it being better for your job search, and helping you not have to report a discharge on your resume, etc.

And sometimes, resignation is in fact the better option for a worker.

But here’s the issue: do you really want to rely on your employer’s advice about what’s in your best interest at the point the employer is asking you to leave?

Often, for Wisconsin workers, it is a worse decision to agree to a forced resignation than to be fired.

Here are some potential disadvantages of resigning (as opposed to being fired):

It Can Hurt Unemployment.

A resignation can make it more difficult for a worker to get unemployment benefits.

It Can Hurt Potential Legal Claims.

A discrimination claim or other termination-based legal claim can lose value if the worker resigns as opposed to being fired.  An employee who is fired can assert the employer (the termination decision-maker) is clearly responsible for the job termination and the lost monies that result from that decision clearly made by the employer.  An employee who resigns leaves himself more open to argument that he (rather than the employer) was the person who caused his lost monies, thus the employer argues it should not be responsible for legal damages.

It Can Hurt Potential Severance or Settlement Negotiations.

If an employer has a signed resignation document from you– particularly if it’s also accompanied by a signed statement “admitting” wrongdoing that you didn’t really agree with but signed anyway because you felt pressured, etc.– then the employer knows that you have weakened the potential value of your legal claims.  Lesser legal claims = lesser leverage for you to negotiate severance or settlement terms with the employer.

This post is NOT saying that agreeing to resign may not have potential benefits, or may potentially help a worker, in some situations.

There are some situations where on the scale of pros and cons, it makes sense to accept a forced resignation rather than be terminated.

But in my observation, many workers do not consider and weigh all the pros and cons, and too readily accept the employer’s assertion that resignation “is in your best interest.”

If  an employer is asking you (or telling you) to leave, your best interest is not the employer’s first priority.  Consider talking to an employment attorney, or at least someone who is independent of the employer and who can speak to you about what is in your best interests without having to serve the employer’s interests as well.

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WI Employee Discrimination Complainants and Go-With-Your-Gut Settlement Offers

Of those workers in Wisconsin who file discrimination complaints without an attorney, most have no idea how much a fair settlement value would be for their case.  And how should they?  For nearly every employee complainant, this is their first legal complaint, and they have no familiarity with the legal process, with what sorts of awards can be won, or with what typical settlement ranges are.

So I can’t blame any employee for not knowing what their case could be “worth”- that’s a very difficult thing for a non-attorney to get experience with or solid information about.

However, an employee who does not have an idea of his or her case’s value will often make mistakes that cause their case not to be settled, and litigation to be prolonged (and the case possibly lost).

In my experience, employees who do not have an accurate idea of what their case is worth will tend to highly overassess the worth.  This overassessment is not usually based on the law, but rather based on the employees’ “gut” feeling of how much the employer should pay, based on how unfair the employer’s conduct was.

It is not uncommon for an employee complainant to assume that his case could be worth hundreds of thousands of dollars, or several years’ worth of severance pay, when in fact his specific case has legal and practical limitations that make his case worth far, far less than what he thinks.   (Now, there are a few employment discrimination cases out there that are in fact worth hundreds of dollars in damages, but those are the vast minority of cases).

Often, as a result, employees who have these wrong assumptions will: (1) make settlement offers that are way too high, often higher than legal damages/award maximums;  (2) cause the employer to feel the employee is completely unreasonable, and stop engaging in any further settlement talks.

You don’t want to block yourself out of a reasonable settlement offer because you are asking for the moon and don’t know it.

On the other hand (although less common), some employees will significantly underassess the value of their case.  For example, an employee may focus on the value of a discrimination claim and not know that she in fact has a potential claim for unpaid overtime wages that has strongly supportive evidence and is worth far more in damages/monies than the discrimination claim being pursued.

This is where attorneys can help.  Employment law attorneys who have worked on and evaluated many discrimination claims can provide a thorough legal analysis of what your specific case may be worth, and whether your analysis may be missing any important factors.  The attorney’s assessed value may be much lower than what you want to hear- or maybe higher, to your pleasant surprise- but either way, it’s best to get all surprises removed from the equation as early as possible.

Here is a post that discusses “Things to Consider Before Filing a Discrimination Complaint at the Wisconsin ERD or EEOC,” including information about valuing an employee’s Wisconsin discrimination case.  That post, and this one, are for general information only.  Again, if you want a specific evaluation of your own discrimination case’s value, you should consult with an employment attorney to get a complete assessment.

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