Minnesota Severance Negotiation Lawyer

If you or a loved one has questions on severance negotiation, reach out to an employment attorney. Our lawyers at Heimerl & Lammers are experienced in protecting employees’ rights with severance negotiation. Our severance negotiation attorneys will take the time to review your situation, discuss your legal options, and fight on your behalf to get you the best severance package possible. For more information about how Heimerl & Lammers can help you, get in touch with us for a free consultation by calling (612) 294-2200.

What Is A Severance Agreement?

A severance agreement is one that exists between employers and an employee who is departing from a company, and it provides some benefit to the employee upon or after their departure from the company. However, employers do not enter severance agreements and provide severance packages to their employees to be nice and give them additional benefits once the employee leaves. Instead, a severance agreement generally releases the employer from any potential claims the employee may have against the company, so there is a massive benefit for the company.

Many companies will present a severance agreement as a take-it or leave it. That is not the case. Due to the benefit they are receiving. They may be open to negotiating the terms of the severance agreement. Therefore, you should not sign it immediately if you are offered a severance package and handed a severance agreement. Instead, you should read it thoroughly and hire an attorney to help you understand the terms of the agreement.

Who Can Receive A Severance Agreement?

The simple answer is, yes, employers can offer a severance package to anyone. Minnesota is an “at-will” employment state, meaning that an employee can quit for any reason and, in most circumstances, be fired for any reason. As a result, a severance package is not something that is required to terminate someone. Instead, employers usually desire a severance package when the employee has been with the company for a long time, and they want you to waive any legal claims you may have against them. Otherwise, you may have a claim in the future.

Severance Agreements For Those Over 40

Federal and state law provides that you cannot discriminate against someone because of their age if the employee is at least 40 years of age. Therefore, companies tend to offer these packages to individuals 40 and over who are being terminated. Companies may do this to avoid a discrimination claim against them in the future, mainly if the employees have worked for the company for a long time.

Severance agreements drafted for employees over the age of 40 must meet the Older Workers Benefit Protection Act (OWBPA) requirements because it protects such employees. The OWBPA requires that employers follow a strict timeline to get a valid release of any age discrimination claims. It also required that the employer provide additional, detailed information when terminating two or more employees at the same time. The OWBPA is an employee-friendly Act that attempts to protect these employees from being taken advantage of and has the following requirements as well:

  • Easily understandable written language
  • No clause waiving future claims
  • Additional compensation beyond initial entitlements
  • Encouragement to seek an attorney for advice
  • A minimum of twenty-one days to consider the agreement and seven days to revoke the agreement after it is executed

Why Are Severance Packages Offered?

There are many reasons why employers offer severance packages. Some of those reasons include:

  • The employer has a policy of offering employees severance packages upon their departure
  • The employee has potential claims against the employer that gives them leverage in requesting a severance package in exchange for a release of such claims
  • The employer has an employment contract that entitles them to a severance package
  • The employee falls under a union contract that entitles them to a severance package

Circumstances In Which Severance Packages Are Offered

Employers will not offer a severance package every time someone leaves the company. However, severance agreements are popular when an employee has access to confidential and proprietary information. Common situations for offering severance pay include:

  • Layoffs
  • Eliminating a position
  • The employee is a bad fit for the role or company culture
  • The company is being restructured

Should I Release My Potential Legal Claims?

As mentioned above, Minnesota is an “at-will” employment state. Thus, your employer can fire you for any reason. However, your employer cannot fire you for something that goes against your employment contract, the company policy, a union agreement, or for discriminatory reasons. In addition, federal and state anti-discrimination laws protect employees from being fired as a result of discrimination because of the following:

  • Race
  • Color
  • National Origin
  • Sex, including pregnancy
  • Religion
  • Age, if the employee is at least 40 years old
  • Disability
  • Citizenship status
  • Genetic information

However, anti-discrimination laws do not apply to all employers. In those cases, signing a severance agreement may not be waiving the right to bring a discrimination claim because you did not have the right to start. Moreover, the law does not shield most of these protected classes if the employer has less than fifteen employees.

You are releasing potential discrimination or wrongful termination claims. Suppose a coworker harassed you before your departure. In this case, you’d waive the right to file a workplace harassment claim. If your boss sexually harassed you and then asked you to terminate your employment on the condition that the company would provide you with an enticing severance package, you should contact an attorney and consider your options.

What Is Included In A Severance Agreement?

Many employers will include the following in their typical severance agreement:

  • Compensation
  • Consolidated Omnibus Budget Reconciliation Act (COBRA)
  • Unemployment
  • Transition Help

Compensation

There are several things a company can include in your severance package compensation, and if they aren’t, you can negotiate for them if you desire. First and foremost, your severance package will provide either a lump-sum payment, continued salary, or even installment payments through a specific time (e.g., $5,000 on the 15th of every month starting on the Effective Date of the Agreement through the end of the year). It can also include the payment of unpaid bonuses, unpaid commission, expense reimbursement, accrued vacation, or sick pay that is generally not paid out. It can also include the pre-mature vesting and payout of company stock.

Consolidation Omnibus Budget Reconciliation (COBRA)

The Consolidation Omnibus Budget Reconciliation (COBRA) is a federal law that allows you to keep your employer’s healthcare coverage for a limited time after your employment ends. The continuation coverage only applies if your employer has at least twenty employees.

Unemployment

Upon termination of your employment, employees can apply for unemployment if they qualify. Minnesota unemployment requires that your employer base your unemployment benefits on the number of earnings paid to you during the previous 52-week period. Therefore, if you received a lump-sum severance, that will go into the calculation.

Transition Help

Within a severance agreement, employers can offer employees transition services. These services assist a departing employee in finding new employment and writing letters of recommendation for terminated employees.

Terms To Negotiate In A Severance Agreement

While employers generally present severance agreements as take it or leave it, there are many things you should consider negotiating.

Compensation

As described above, compensation can include some things and specifications. However, what the employer presents is not the end of the discussion. You can negotiate your severance compensation and how long you will receive it, such as negotiating your salary. The typical time for continued salary is between six and twelve weeks.

Paid Vacation Time

If your employer does not generally offer to pay out accrued paid time off or sick pay, either can be negotiated and added to your severance agreement. In other words, if you had eighty hours of unused paid time off at the date of your termination, you would receive an additional eighty hours of payment.

Benefits

As discussed above, this is generally included and not something you will need to negotiate. Still, you can negotiate for it if your company does not include continued health insurance in the severance agreement. Moreover, you can arrange for the employer to cover the entire premium.

Stocks

Generally, employers will offer employees stock that will vest on a specific timeline. For example, suppose your employer gives you fifty shares that will vest quarterly over five years. Approximately three shares will vest every three months after your start date. Therefore, if you leave the company after two years, you will have many shares that are not vested. This means you cannot cash them out and they essentially become lost money that you can never recover. However, they are not a lost compensation avenue if you negotiate for them to vest in your severance agreement.

Liability Waiver

The severance package will likely include a clause disclaiming liability for any complaints and the above terms. Instead of just accepting this provision, you can negotiate it and hopefully narrow the scope of your disclaimer.

MN Employment Lawyers For Severance Negotiation

Are you or someone you know in need of help with severance negotiation? Contact the employment law attorneys at Heimerl & Lammers. We are skilled at analyzing employment agreements to gauge how to best approach your severance negotiation.

What Concerns Do Employers Have?

The primary purpose of a severance agreement is to effectively relieve the employer from any liability to the employee for matters that arose when the company employed the employee. These claims can include discrimination, wage and hour, breach of contract, overtime, and retaliation claims. Therefore, it is essential that you fully understand two things. These are:

  • whether you have a potential claim against your employer and
  • whether it is worth signing a severance agreement that waives your right to bring a lawsuit against them later

The following are common traps that you should know because they make the agreement extremely one-sided.

  • The release does not protect all relevant parties.
  • The released party agrees to pay severance.
  • There is a non-mutual non-disparagement clause.
  • The employee cannot release future claims.

Release Fails To Protect All Parties

The release will only protect the employer in some situations, but it will fail to release all relevant parties. Here, it means that the employer does not mean to protect all parties but only itself.

The Released Party Agrees To Pay Severance

If your employer offers you a severance agreement, the company should pay you. You should be leery if the agreement indicates that the party it’s releasing is the one that will pay. Such an arrangement could mean several things. For example, let’s say there’s an officer you had a sexual harassment claim against. In this case, the company may have that officer pay your severance to avoid paying out of their pockets.

Non-Mutual Non-Disparagement Clause

A non-disparagement clause provides the parties will not make derogatory comments about the other party. Here, the employer should provide that they will not make disparaging statements against the employee, and the employee will not make disparaging statements about the employer. But, again, if it is not mutual, this is a trap and should be corrected by your attorney.

Employee Cannot Release Future Claims

A court will invalidate an agreement that requires the employee to release future claims because you cannot release something that has not occurred.

What Makes A Severance Agreement Invalid?

A severance agreement is merely a contract between an employer and an employee. Therefore, to be valid, it must be valid under contract law. To create a valid and legally binding contract, you must include the following elements:

  • Offer. An offer in this circumstance is the employer giving you a severance agreement that lays out specific terms and conditions.
  • Acceptance. Acceptance is the actual acceptance of the agreement, such as signing the agreement. Silence cannot be treated as acceptance in this situation.
  • Consideration. Consideration is the benefit to the person who has the obligation or who makes a promise to do something. Here, the consideration is the company providing compensation in return for the employee releasing their potential claims against the employer.
  • Intention to create a legal relationship. While an agreement does not necessarily need to be worked out in meticulous detail to be valid, it is recommended that concerning severance agreements, you have meticulously worked out every single detail. If the severance agreement does not agree on material components of the severance agreement, then it will automatically be invalidated by a court.
  • Legality and capacity. A contract cannot be valid if it violates the law. In this situation, if the severance agreement violates OWBPA, it will be invalidated. Moreover, only people who have the mental capacity to enter contracts (i.e., must be above 18 years old).

Do You Owe Taxes On Severance Pay?

The simple answer is, yes, you will owe taxes on your severance pay. However, the state income tax required depends on where you worked, how long you worked, and where you lived when your company terminated you. If you are a Minnesota resident, you must allocate the total payment to Minnesota upon separating from the company. On the other hand, if you are not a Minnesota resident upon your separation from the company, you must allocate the payment based on your percentage of time worked in Minnesota.

For example, suppose you worked for a national company for ten years. You worked seven of those years in Minnesota and three in New York. You were a New York resident at your separation from the company. The law requires you to pay Minnesota state income tax on 70 percent of the severance pay in this scenario. But, on the other hand, if you were a Minnesota resident upon your separation, you would pay Minnesota state income tax on 100 percent of your severance pay.

Can You Rescind Your Severance Agreement?

If you have already signed your severance agreement and are having second thoughts, don’t fret. You have a fifteen-day window from the date you signed the agreement to rescind it.

Employment Law Attorney In Minnesota

Suppose your employer asks you to sign a severance agreement. In that case, it is essential that you thoroughly read it before agreeing to sign. Do this to ensure that you understand your obligations under the severance agreement. The attorneys at Heimerl & Lammers can help you understand the severance agreement. What’s more, we will aggressively defend you if your former employer is suing you for breach of a severance agreement. At Heimerl & Lammers, we have the knowledge and experience to protect your rights under a severance agreement and ensure that an employer does not take advantage of you. For a free, confidential consultation, call us at (612) 294-2200.

Severance Negotiation

Severance Agreement

In order to avoid a lawsuit for illegal conduct, employers will often be willing to offer a severance in order to get a signed release from you to give up your claims. We can negotiate a better severance than that offered by your employer and even get a severance for you when one is not offered.

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