What is a Fair or Reasonable Severance Amount?

Apr 10 2024

Josh Goodbaum: Hi, Amanda.

Amanda DeMatteis: Hi, Josh. What are we gonna chat about today?

Goodbaum: Well, I want to talk about a question that I get all the time, I know you get all the time, and that is: “I’ve been terminated; I’ve been offered a severance; and I don’t know if it’s reasonable or if it’s fair.”

So, what’s a reasonable severance, Amanda? How much is enough?

DeMatteis: Man, we spend a lot of time talking to clients and potential clients about this. So, this is a very good question, one we get a lot. Let’s talk about a few different things.

Number one, there are no state or federal laws that require an employer to provide an employee with severance. Period. So if your employer terminates you and gives you nothing in severance, they aren’t violating any laws – they don’t have to. But there are three things to think about when we’re asking, “Is a severance offer that my employer did, in fact, make to me reasonable?”

The first thing is: Is there a policy in place at your employer? So, some companies have a policy that says, “Hey, if you work for ten years for us, you get one week’s severance for every year that you worked,” which would, of course, be ten weeks. If that policy is in place and your employer is following that policy uniformly with you just like they would with every other employee, then that’s probably reasonable. But, there could be exceptions to that.

Second thing: Do you have any claims to leverage against this company, which may make whatever severance offer that they made to you inadequate? For instance, were you pregnant at the time that they let you go? Have you recently complained about some type of illegal employment activity at work? Have you recently complained about race discrimination, or taken a medical leave, or asked for a reasonable accommodation because of your disability? And shortly on the heels of your engagement in what we call that protected activity, you are terminated? Well, there very well may be claims there. And if there are potential claims there, then any severance amount offered to you should really be examined by an employment lawyer to see whether or not these claims may give you some leverage to negotiate a higher severance amount.

And the third thing is this: Is there a goodwill argument? Is there a way for you to say, “Listen, I have a two-year non-compete and you’ve offered me a month of severance. It’s gonna be really hard for me to find another job. Is there a way that we could make this a little bit more balanced so that I can go out and find another job while also getting some income?” Now, your employer might simply say “No,” and frankly, that would be legal because they wouldn’t be violating any laws. But as we all know, sometimes you just don’t know the answer to the question unless you ask first.

So three things to think about: (1) Is there a policy in place? (2) Are there potential claims that you may have against this company? (3) Could you just ask out of goodwill and say, “Hey, I really need a little bit more?”

Also, of course, as we always tell you, whenever you get a severance agreement, this is a legally binding contract, folks, right? You want a lawyer to take a look at it. So give us a call, even if there isn’t a policy, even if there are not claims to leverage, even if there’s not a goodwill argument, you are still signing a contract. Always best to have an employment lawyer take a look at it and we can answer that question of, “Hey, Amanda, Josh, is this reasonable?” It all depends on the circumstances. But we’d be more than happy to talk through it and see whether or not your particular severance offer is reasonable or not.

Goodbaum: I agree with everything you just said, Amanda. I certainly wish, as I know you do, that there were an objectively right answer to the question about whether your severance is reasonable, and unfortunately, as with so many questions in the law, the answer is “It really depends.” So, we hope this is helpful to those of you facing separation and looking at separation agreements. If you have any questions, give us a call. Take care, and we’ll see you next time.

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amanda dematteis discussing fair severance offers

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