Accepting Severance Package with Strings
 

We have an announced reduction in force, and for reasons I don't need to explain here I'm at significant risk for being RIFfed

Generally there's a severance offer based on years of service. I have not heard anything this year, but in the past it's been as much as 1 month per year of service, which would be 15 for me. I'm guessing significantly less this time, but I don't know. You're given the option of a lump sum or continued paychecks with full benefits for the duration. The cost is signing a paper saying 1) I won't sue, 2) I won't go to work for a supplier, and 3) I won't go to work for a competitor. Refuse to sign the paper and I walk out with nothing. Terminated exempt employees are permanently ineligible for re-hire.

15 months pay would be a no-brainer, a virtual lottery win. But what if it's 3 months or 2 months or 1? The reduced employment options hurt - many of my professional contacts will be unable to help.

No pat answers for you, hate to hear of your uncertainty in your employment. I hope you get some concrete answers so you can safely make plans for your future.

Bill

My sympathies for your potential loss -- and my hopes that it won't happen...

But, I am not sure that these things can ever be decided with a simple yes/no, formula kind of answer. They are far too complicted with far too many individualized variables: How close are you to retirement?, How marketable are your current job skills? What are your life goals? How enforceable are the no-compete clauses they may be offering?

Frankly, I find it unacceptable that a company would turn you out and then ask you not to turn to a competitor (or even a supplier) for continued employment in your chosen field -- and offering a bribe does not change that. You either have a relation with them or you don't.

That is, while it is highly unethical to disclose or abuse company specific information or knowledge, you owe it to yourself to not give away or squander your own individual talents and knowledge. They can protect their intellectual property rights -- but it is and should be difficult for them to tell you that you are not able to utilize your own intellectual property and abiliites.

But, my tendency is to take the money as a lump sum -- but be careful not gamble it away (in the market) or squander it... Rather, invest it wisely and safely... And to do the same for yourself: invest your time, energy and talents where they will benefit you for the rest of your life.

So, my take is: They can fire you, and they can protect their property -- but they cannot tell you what to do with your own talents, knowledge and abilities. They can try -- and they probably will. But they are at a disadvantage... But, in the end, you are better off rid of any organization that would F you and then expect you to squander your talents and abilities to their benefit. A GOOD organzation would help you find another job -- not try to stop you from finding one...

I can't offer any advice, but I might find myself in a not-too-different situation. Who knows. At 53 I'm still 10 years at least from retirement, but Monday we were told that our department (and a couple of other smaller ones, all totalling maybe 80 folks) could in ~six months time maybe be down to 20 or 30 with the rest outsourced, or otherwise gone. Not a done deal and who knows how it will look in final analysis, but something definitely will happen. Even if the numbers come in even, the phrase "outsourcing wins in a tie" was used over and over.

In all frankness, our new CEO wants a younger workforce in general, and one that's far less 'personally' involved in their jobs. That is, less personal service and a more "you get what you get and that's it" impersonal approach. More outsourcing, more consultants, less employee involvement in details - We're just to manage the consultants. He's even said that. I can't fathom that kind of idea, but it's his and he's driving it throughout the company. He's also reported as saying (after being hired but before taking over) that he wanted no friends in the company... ? His attitude is running downhill.

Once again - I'm not in a position to offer advice, but you're not alone. :(

iphilpot: I would have to wonder if you would even want to work for an organization like that? And, what could be the future of that organization anyway? It sounds like he is filling it with people who have NO loyalty or ethics -- and filling it with people who are willing to do whatever is asked in exchange for some money... In short, it sounds highly likely likely that he and his backers are raping that organization and they don't want anybody standing up and complaining about it.

I come from a different perspective: Shortly after graduating from college, after a bad experience at an organization where I was making lots of money, I swore that I would never again work for a pay check. If I wasn't proud of my work and enjoying my work I would move on. And, that philosophy worked well for me for the next 30 some years -- and garnered me a lot of money and a good living! But, perhaps, that was a different time? Perhaps what you describe is the way of the future in America?

The company I work for has long had a reputation in general for being an excellent company, and a good place to work. Right now, from Wall Street's perspective the numbers are good but I personally don't think (and what do I know?) they're sustainable given the impact its having on the workforce. I can't say what's in his or anyone else's mind, but whatever it is, I don't understand it. Maybe I'm just not enough of a Type A, driver/driver personality to align with that train of thought.

But, the change over the past year+ is just the icing on the cake for me, since I've been burned out on what I do for 5-8 years now. I've applied for another job inside the company, so we'll see what happens there. I really have no desire to change employers in a general sense (given retirement implications, etc.), but who knows how it will turn out.

I'm afraid you're probably right about the future of business in America - Dog eat dog and live for the minute.

I worked for 5 or 10 years in an environment like that: The organization had been bought (a couple times) and was in a long, slow, slide into the dog-eat-dog, live for the minute environment you mention. Yet, it had a long history of being a fine, ethical organization that had substantial loyalty to its employees, its customers, its venders and its investors... So, as that long, slow slide progressed, there were isolated pockets where the old culture still existed... I was wearing a set of golden handcuffs -- I knew that I would never find an equivalent job or pay check outside of that organization. So, I rode it down to the bottom while hiding out in one of those pockets of the 'old culture'...

It would seem to me as a fairly straight forward decision. For 15 months pay I guess I would sign. For two or 3 months pay I would not, especially if you might get work with a competitor or a supplier.

Unfortunately, this is still going around a lot these days, despite the fact that the economy is getting better. Not sure what your specific questions are, but perhaps this guidance will help a bit. For tax purposes, you're probably better off taking continued checks rather than a lump sum. You can ask to make sure, but there are times when lump sum payments are taxed at a higher rate than your traditional bracket. This is definitely true of bonus income, but may not be the case with your lump sum. That said, there's no risk in spreading the payments out. Also, the cost of benefits bought on the open market is quite expensive, even though you will have the option to continue benefits through COBRA at a reduced cost. Still, I'd keep continued payments to stay on the benefits.

As far as the other issues, this is standard legalese. Courts have consistently ruled that no matter what's on these papers, non-compete clauses can't be overbroad. In other words, saying that you can't go to work for a competitor is tantamount to saying you don't have the legal right to earn a living in the future. If you went to work for a competitor and your soon-to-be former employer sued, there's very little doubt that it would stand up in court. Giving up the right to sue is enforceable, but you probably weren't looking to do that anyway.

Good points, thanks. To your questions:

Retirement is a distant thought, both financially and desire.
Skills are pretty marketable, although a move will be required. I hate big cities, but that may be unavoidable.
Life goals are to continue having adventures and experiences. Health is important, luxury is not. Doubling my salary is not compelling, halving my salary would be challenging but do-able (don't tell my wife I said that, ha). Health care is probably a bigger concern.

The comments above align with what I already know - these people can be beaten in the marketplace. A company of confident, motivated, engaged people will crush a company of risk-averse, frightened people. It's a heck of a lot harder to manage people well, but the payoff in productivity is huge.

You have to do the calculus. The terms of the severance agreement might be negotiable, and it may be helpful to engage a lawyer on that. One thing to do is narrow down and be as specific as possible as to whom you'd be restricted from working for. Also understand what the ramification might be if you signed the agreement, but then chose to break it because you got a juicy offer from a competitor.

I'm not a lawyer, and this is not legal advice.
If you get fired(I wish they would just call it what it is), take the monetary option that is most beneficial to you, that should be your primary concern. Non-compete clauses are very hard to execute, because they can not infringe on your right to work, ad earn a living. I've been there, and it sucks.
Good luck.

Depending on state laws, non-compete agreements generally are not worth a lot. It is my understanding that they can't keep you from earning a living, no matter what you sign. HOWEVER, I am not a lawyer, and I would suggest that you contact one with this specialty for your state, as laws vary from state-to-state, and get a reading for your situation.

I would be hesitant to do this, as you may be digging yourself a hole that you don't need to. In the final analysis, it would be up to a court to decide this issue, and you don't want to screw up the latitude the judge may have in making a decision by having pre-existing understandings and agreements outside of and in addition to the standard non-compete agreement. However, it is unlikely to ever get to court.

It'd be worth it to pay for a consult with an attorney who deals in employment law in your state.

If it makes you feel any better, in my profession (veterinarian), it's standard to be required to sign a noncompete at hiring time in states that allow it. The concern is that you will take *your* (their) clients and go open a practice down the road, or take them with you to another clinic. As long as they're "reasonable," noncompetes in Arizona will hold up and there's no use going up against one. The scary thing is, it applies if you part ways for ANY reason, at either end's behest, you don't have to do anything wrong. Mine is 10 miles for 3 years, which would require a move to a whole different area. So we kept our old house on a "county island" in Phoenix as a rental when we moved "just in case" we ever had to move back with all our animals, most cities have a 4-5 dog limit.

So I see a severance package as a bonus that you might as well take because it could be nothing otherwise. But I'd pay for an attorney consult before signing anything.

I know what I'm talking about:

a) Check with your state unemployment insurance department, or an employment lawyer in your state, you may be able to take the lump-sum and collect UI benefits afterwards, and probably not if you are still payrolled. This can make a big difference to you financially. The rules are state by state.

b) The validaity of non-compete are determined state by state. Typically, they are enforceable if they are limited in time, scope and geography. Often the restrictions you mentioned will be limited to a two year post-termination. Talk to an employment lawyer, you may find the restriction is not as bad as you think, and if you are likely to relocate to a worker friendly state, maybe they are irrelevant.

c) People seem to assume that if they don't opt for the RIF the job just continues. Not necessarily so, I've seen lots of people pushed out in the next year or so and what they are offered later is a fraction of what the original RIF money was. Big mistake.

Talk to an experienced employment law attorney, find him or her through NELA's site http://www.nela.org/NELA/

First, try not to worry too much until you see the whites of their ... contracts. Rumors are sometimes right, but that's often an exception. Maybe you should go for a bike ride?

If it does play out as you've outlined, look carefully at the details and your options. For example, how long does the no-compete clause hold? I'd expect "forever" to make (your) lawyers salivate. If it's for, say, a year, well, maintain your contacts. Even if it's for longer than your paid time off (15 months), I suspect they won't care if you let three months or so pass before you start working. As others have mentioned, non-compete clauses are rarely worth the paper they're written on.

Never disclose proprietary information, of course. That goes without saying.

Finally, I'd think hard about taking the "terminal leave" option, with benefits, over the lump sum payout. Take three months, do a TransAm tour, keep working your contacts via email, then come home and get back to work!

+1

You might want to seek some legal advise on the section where you cannot go to a competitor for employment. These "non-compete" clauses are dealt with differently in each state. Here in this state an employer that separates you cannot prevent you from using your "job skills" to gain employment in the same line of work. You simply cannot use proprietary information such as customer lists, pricing, etc. to carry information to a new employer that is a competitor.
The will not sue part includes such gems as no suit for age discrimination or sex discrimination or sexual harassment. Generally, if you don't sign you give up the severance pay. But some courts have ruled that they cannot make you sing away your constitutional rights under such circumstances.

Also. Check in your state how you work the severance pay and any unemployment compensation you might be eligible to claim. In some states you can "double dip". Meaning get your severance pay in periodic checks and collect state unemployment compensation at the same time. One of the women we ride with is facing the same thing you are. She will collect her severance and then apply for state unemployment compensation after the severance is used up.
Depending on your age you may be able to collect unemployment a bit longer. At one time this state had a special extension for those over 55 since their chances of finding other suitable employment were less than those under 55.

But by all means get some good legal advice and talk with an accountant on how you work the taxes with it and rolling over any retirement accounts you might have.

Good luck. I was caught in a downsizing some years back but I was lucky enough to be old enough for early Social Security.

Spruce up your resume, apply for jobs NOW with your suppliers and competitors,use the business contacts.Don't use the company computer.Your company is not employee friendly at all.Thats my .02

lphipot ,

I am the same age as you . 53 . My company wants younger workforce these days because they are cheaper and less benefits . I took the severance package when it came up . Oct 31 will be my last day at work . I got 26 weeks of pay and medical coverage for another year . I talked the situation over with Ms. Mapei , she is ok with it . Since we have no debt , mortgage free , no kids , there is no pressure for me to find another job .

I sweated out 25 consecutive annual holiday downsizings. Each one came with fewer incentives.

I took this year's and will be retired as of the 31st. Three weeks after the retirement decisions were non-revocable the company did away with all retiree health care benefits. We also had the option of signing a pile of non-sue agreements or walking away without the incentive. I signed. I'll find a way to survive and probably sleep better too.

It's a very personal decision that you must make, and then live with, yourself.

Good luck to you, sir.

I actually retired in April but for about 3 years before I was waiting for redundancy. I mean waiting as The company was going downhill and I could not wait to get out.

The two that took redundancy while I was there could not have been happier. Long term employees that had a good payout and they found jobs fairly quickly after wards. Whether the jobs are around for you to walk into will be the problem. A Years pay sounds good- till you are off work for 3 years. But more destroying is working for a company that you do not enjoy working for. I know -I was there.

Look at the job market and see if there is enough for you to apply for before you make the decision.

Wish you luck but the decision hopefully is yours.

I'd only take continued checks if I were absolutely certain the company would be solvent enough to continue to issue those checks for another 15 months.

I would second two thoughts that have been put forward. And I say this from having been in the executive suite, and also having been both the windshield and the bug.

The first offer in a RIF is nearly always the best.

It's highly unlikely that any non-compete agreement can keep you from earning a living. If you're exempt and later compete directly it might be a tough fight if they come after you, but you'd be likely to win. Don't use any proprietary information. Period.

I'm not a lawyer, but I did sleep at a Holiday Inn Express earlier this year.