Noble Views

It is usually not with a feeling of great joy that an employee reads the separation agreement just handed over by his or her soon-to-be former boss.  And while your head may be spinning with anger and anxiety now is the time to put those thoughts aside and take a deep breath. There is a popular misconception that all of these agreements are “standard” and don’t require much review.  Not true.  There are many variations of key provisions that can have significant impact on your career or financial well being down the road.  And many of these provisions are negotiable.

First of all, a “separation” agreement is not the same as a “severance” agreement.  A separation agreement is the entire contract that details an employee’s termination including terms about items like continued pay, benefits and potential legal actions against the employer.  In the simplest terms, “severance” means an amount of money that the employer pays you after your termination (usually as consideration for your agreeing not to sue them for firing you).    The severance pay is usually included as one of the terms in your separation agreement.  But, remember, this is a contract and you will be bound by its terms just like any other contract.

Before you begin to read through the agreement, you must first review your own employee documents (your employee handbook or (if you were lucky) an employment contract) to see if you are entitled to pay or benefits notwithstanding the terms of the separation agreement.  For example, state law requires your employer to follow its stated policy about paying you for your accrued but unused paid leave time such as vacation time.

Next, begin mentally preparing for negotiations with your employer.  This will give you some leverage when you hammer out the details of your separation agreement.  Do you think you were terminated on the basis on race, age, sex, national origin, disability, pregnancy, or religion?  Did your boss fail to pay you a commission or a bonus previously promised? Were you fired in retaliation for reporting sexual harassment or for filing a Worker’s Compensation claim?  It’s important to sort through these issues because the most important aspect to your employer is your agreement not to sue the company; otherwise known as a “release of claims.”

A release of claims clause basically prevents you from taking legal action against your employer for acts that affected your employment.  Typically these claims would include discriminatory acts (e.g. I didn’t get the promotion because of my age, sex, race, disability, etc.) or a failure to pay you some amount of money that you were entitled to  (e.g.  We agreed that I would receive a percentage from the sales I generated).  Employers do not want to spend time and money defending claims from their former employees.   If you are looking for more favorable terms in the agreement, now is the time to voice any potential legal claims that you think you may have.  This might give you more leverage to negotiate a better deal.  This is not about threatening your former boss; it is about negotiating the best deal for yourself.    Remember, however, that in most at-will employment situations, an employer is not required to offer you anything (agreement, severance or otherwise)  in connection with your termination.

Now you are ready to analyze your separation agreement.  Here is a small sample of some key issues that you should check for:

• Lump Sum or Installment Payments

If your employer is offering severance compensation, make sure that the contract says exactly how much and how it will be paid, whether in installments, in one lump sum, or any other variation. This could have possible tax consequences that you should be aware of.

• Non-Compete Clause

Be on the lookout for a non-compete clause which may strictly limit your ability to obtain a new job in the same field in which you were working, whether by time, geographic area or other restrictions.  Unless you are embarking on an entirely new career, this is very important. If the time limit on getting another position in the same field is longer than the number of weeks of your severance, it might not be worth it.

• Mutual Non-Disparagement Agreement

If you are leaving on less than favorable terms, ask for a non-disparagement agreement. This will be mutually beneficial for you and your employer: you agree not to bad-mouth your employer and/or the company and he returns the favor by agreeing to give you a reference check with only the dates and position of your employment, and not to disparage you to potential employers.

There are other terms to consider such as confidentiality provisions, prohibition on re-applying for employment, participation in health and life insurance programs, letters of reference, and eligibility for unemployment compensation.  These agreements are rarely “standard” and there is often room to improve the terms if you know what to look for.

The Equal Employment Opportunity Commission has information on severance agreements as well.  You can find it at this link: http://www.eeoc.gov/policy/docs/qanda_severance-agreements.html

First and foremost, don’t make things up and don’t bribe witnesses.

Case in point:

A female executive of a Georgia based mortgage company sued the company for sexual harassment and assault asserting that the CEO had, among other wretched acts, groped her in front of other employees.  As part of its defense, the company provided the court with a declaration from a witness that vehemently contradicted the woman’s claims.  A VP of the company claimed that he was present when the witness signed the declaration. Which might have been a problem for the plaintiff except that the declaration turned out to be a complete fabrication and the signature a forgery.  And it turns out the company gave a new Lexus to the cooperative VP shortly after he had “witnessed” the signing of the declaration.  Oops.

The judge on the receiving end of this “evidence” was not amused.  He issued what he called the “ultimate sanction” against the company by declaring a default verdict in favor of the plaintiff (meaning that the judge found that the company was liable for all the claims alleged against it and the jury would not be asked to decide whether the company was liable or not).  Instead, the judge read the complaint to the jury and told them they must accept as fact a string of allegations of gross sexual misconduct committed by the CEO intended to humiliate and demean the plaintiff.  Then the judge asked the jury to determine the damages to be awarded to the plaintiff.

The jury awarded the plaintiff $9.2 million.  That could pay for a significant amount of truth-telling serum.

Given the horrible winter we’ve been having, I’m not surprised that I’ve been asked this question more than once in recent weeks.  “My office was closed for one day due to the weather and road conditions.  Now, they are telling me that I have to burn a vacation day for my “day off”.  It was hardly a vacation and it wasn’t my choice to stay home.  Can they do this?”

Before I answer the question, I’m going to make some assumptions about the person asking the question.  First, I am assuming that the employee is an “exempt” worker, that is exempt from the minimum wage and overtime requirements of the Fair Labor Standards Act.  There are many criteria to look at to decide if someone is “exempt” but generally speaking a salaried employee who is in an executive, administrative, professional or sales position will probably be “exempt” under the FLSA.  Second, I’m assuming that the company is not docking her paycheck for the missed day.

Given that assumption, the short answer is “Yes, they can do that”.  As there is no requirement for a business to offer any paid leave, the company can decide when an employee must take a vacation day.  Although I personally think it’s a short-sited employment practice, the company is not violating the law by requiring exempt employees to use a paid vacation day for a weather related absence.

The Department of Labor issues guiding principles on the FLSA and its implementation.  The DOL’s guidelines re: inclement weather absences and vacation leave are as follows:

• Employers who are open for business during bad weather: may deduct banked paid leave OR salary deductions from employees for weather-related absences;

• Employers who are closed for business due to bad weather: may deduct banked paid leave from employees for weather-related absences but employers must pay employees their regular salary for the “snow day”

What about the employee who has no banked paid leave? The DOL is clear that even if the employee has used all her allotted vacation time for the year, a company that was closed for business due to bad weather cannot deduct pay from an employee for staying home on that day.

So, while companies can deduct paid leave time and (if they were open) deduct salary from employees for weather related absences, I’m not sure they should.  It doesn’t do much for employee morale to punish people for having the good sense to stay off the roads during a blizzard.  I believe the better practice is for a company to have a fair inclement weather policy and distribute and discuss it with their employees before bad weather strikes.

Recent news has not been good for large law firms.  Even in the best of times, large law firms carry enormous overhead from lofty office suites to high salaried associates.  These costs have traditionally been borne by clients with deep pockets who can afford the fees associated with these firms.  As the economy has changed the pocket level of many clients, they are no longer able or willing to pay expensive fees for legal services.

A small law firm has always been the smart economical choice for clients but now with increasing technological advances the choice is as much about speed and quality as it is about budget.

One distinct quality of a small firm is its ability to move and adapt quickly.  For example, if you want to schedule a deposition with a partner at a large firm generally there are many layers of staff that you need to interact with to get a date or change a date.  With a small firm, it’s usually no more complicated than an email.

Second, access to online research services and advanced communication tools make responding to client’s questions simple and efficient.  A small firm doesn’t have to wait to send a first-year associate to the law library to get a research question answered for a client, she simply accesses her laptop and quickly responds to the question.

Third, most of these costs (research, long distance phone calls) are not charged to the client but absorbed in the business model of running a small practice.  If they are incremental expenses related to your engagement, you can be assured that they will be passed on to you at cost.  No $1 per page copies at our firm!  Finally, the old constraints of scheduling meetings only during weekdays and standard business hours doesn’t apply to a small firm that has the freedom of flexibility.  Although a larger firm can claim that it has greater breadth of knowledge as a resource, a small law firm such as ours, has a deep bench of attorneys to call upon to serve as co-counsel in areas outside of its specialty.

And, most rewarding for us, a small firm has the luxury to get to know their clients in a way that most large firms simply cannot afford to do when they must meet their sizable billable hour requirements.

My eight-year old son recently picked up a landline phone with an attached cord and asked me quizzically, “Why can’t I walk with this phone?”

One of the many ways in which a small firm can now provide the same, if not better, quality of service that a large firm can is in their technology IQ.  Lawyers with high tech IQ will soon think of a phone system or a fax anchored to a physical location is as ancient as a phone anchored to a wall.  With the use of e-fax services, VOIP technology, internet based legal research, comprehensive management software and office files stored in an online “cloud”, a law firm can move with dizzying speed and gratifying convenience for its clients.  No longer do we need to put off that phone conference or meeting until Monday, we can do it just as easily on Saturday over video conferencing with files accessed from a secure online storage system.  Less travel, less cost, more speed.

Why is this good for the client?  Because generally the greatest expense at large law firms are the large number of personnel that the client’s fees must support.  For each partner there are associates for each associate there are paralegals and for each paralegal there are office assistants.   With technology and automation, these vast expenses are eliminated.  Additionally, clients no longer have to wade through staff to connect with their lawyer and get some action on their case.  It’s a win-win.  Except perhaps for wall phones.