Is your Severance Agreement Fair?

Severance Agreements and your rights

Severance Agreement Cleveland Ohio

What is a Severance Agreement?

By Attorney Daniel Myers, Esq.

A severance agreement is a contract that your employer may ask you to sign when you are being laid off.  By signing it, you agree to waive all claims that you might have against your employer, and in return you receive some benefit, usually additional pay and/or benefit extensions.  For example, your employer may offer you 6 weeks' additional wages, payout of earned but unused vacation time, and payment of an additional 2 months of health insurance premiums, in exchange for you waiving all rights to sue your employer.  These contracts are in writing, and usually state that you have 21 days to accept the offer (if it includes a waiver of age-related claims under the Age Discrimination in Employment Act).

You are not obligated to accept a severance agreement or offer, but once you accept it, you are bound by it, unless the agreement states that you have 7 days to change your mind (usually included when the agreement waives age-related discrimination claims).

You Must Fully Understand Your Severance Agreement -- a Lawyer Can Help

It is essential to fully read and understand what you are signing.  Nearly every agreement requires the employee to waive discrimination claims, wrongful termination claims, and the right to pursue or receive compensation for prosecuting False Claims Act lawsuits.  An attorney can help you understand whether you may have a discrimination claim, or may be able to bring a False Claims Act lawsuit, and help you figure out whether it is better for you to pursue those claims, negotiate for additional severance, or take the severance agreement as offered. 

Some agreements may also include non-compete language, which limits your ability to work in a similar job, or to work for a competitor of your soon-to-be-former employer.  If your severance agreement contains a promise by you that you will not compete against your former employer, you need to carefully consider whether it is worth signing it or not.  If you can't work in the same type of field or same position that you are now for at least another year or two, is another month or two of salary worth it?  If there is a non-compete agreement included in the severance agreement, is it even enforceable?  These questions must be dealt with on a case-by-case basis.  The answer may be different for different coworkers at the same company.  That is why a lawyer's advice is important, and why you may need to talk with a financial planner, as well.

What is the False Claims Act and How Does it Impact Your Severance Agreement?

False Claims lawsuits are also called whistle-blower lawsuits or Qui Tam lawsuits.  A whistle-blower, often a former employee of a company, may be aware of illegal or fraudulent business practices that a company has used to defraud the the United States Federal government.  If the fraud is not publicly known, that whistle-blower may have the ability to bring a lawsuit on behalf of the United States of America.  If the lawsuit is successful, or if it leads to a settlement, the whistle-blower may be able to recover between 15% to 30% (depending on whether the Department of Justice intervenes) of the total amount recovered for the United States.

False Claims violations are prevalent in the healthcare industry because there are so many federal regulations on medical-related companies, and because the government purchases a large amount of the medical treatments provided to patients.  It's the government that runs Medicare insurance, and the Veterans Administration hospitals, after all.

If a company has been using deception about its services or product, including double-billing, misrepresenting characteristics of equipment, or covering up failures in the product, which it then turns around to sell to the government, or which Medicare covers the use of, that company may have liability under the False Claims Act, and a whistle-blower may be able to bring that information forward.

It is important to speak with an attorney before making the information public.  Once a false claim is made public, the whistle-blower usually cannot bring a claim in court about it.  It is important to figure out what happened, what can be proved, and to work on getting the matter to court quickly to not only protect our tax dollars, but also preserve the right of the whistle-blower to receive compensation for the risk they are taking.

If you believe that a company you have worked for has misled the government and caused the government to pay for something it should not have, you may have a whistle-blower claim.

However, if you settle your claims by signing a severance agreement, while you may be able to tell the government what happened, you may never be able to bring those claims into court, and you may have forever lost the ability to be compensated for taking the time and risks needed to bring it to light.

If you are aware of potential false claims, you need to discuss them with an attorney so that you can get the advice you need about whether you should or should not sign your severance agreement.

Look out for "Mistakes" in the Legal Language

Sometimes, a company can mess up a severance agreement.  Severance agreements, like any other contract, are filled with legal language, sometimes very complex language.  Companies make mistakes, but you need to watch for those mistakes to make sure you don't bear the burden of them later.

Sometimes things are left out of severance agreements.  If Human Resources, or your manager, tells you that the company will pay your earned and unused vacation time, but there is nothing written about it in the agreement, that may be a mistake.  If you sign the agreement thinking you will get that money, you may never see it.  You need to make sure that everything you are told and promised actually makes its way into the severance agreement.

Similarly, the numbers don't always add up.  If you are told you will receive two weeks for every year you have been with the company, but the agreement says you will only receive one week, you need to address that before you sign it.

It is a good idea to have an attorney read over the agreement to check it for potential mistakes, and to give you pointers and explanations about what is likely to happen if you sign the agreement.  The answers may surprise you.

Severance Agreements May Delay Your Unemployment

Many people think about filing for unemployment as soon as they are laid-off.  And you should do so immediately.  However, if you receive a severance payment, that payment may delay your ability to receive unemployment benefits, equal to the number of weeks of severance pay you received.

The Ohio Department of Jobs and Family Services (ODJFS) may deduct the amount of your severance pay from your unemployment benefits.  Severance is still probably more than your unemployment benefit, but don't expect to "double dip."  Your employer may report the severance pay to ODJFS, or it may not, but you have a legal duty to report the income.  If you are overpaid unemployment, and ODJFS later discovers you never reported your severance pay, you may be forced to pay back the overpaid unemployment amount.  For larger amounts, the Attorney General may file a lawsuit against you to collect the overpayments.

By not reporting the severance payment to ODJFS, you run the risk of being overpaid and losing benefits or being forced to pay the money back later, when you may not have it.

On the flip-side, if you are paid the severance pay, but are not terminated on your termination date, the payment essentially becomes a kind of "retention bonus," and may be included in your ordinary salary.  If you are then terminated later than you were originally told, and apply for unemployment, your base salary may be higher, and your unemployment benefit may also be higher as a result.

Attorney Dan Myers Can Help

Dan Myers and the attorneys at Myers Law, LLC can help you review and understand your severance agreement, and create a plan of action based on what your options are.  Myers Law, LLC has experience analyzing, reviewing, and negotiating severance agreements.  

Myers Law can help you determine if you may have a discrimination claim, whistle-blower claim, or other legal rights that might give you the option to negotiate your severance agreement or file a lawsuit.  Myers Law can also warn you about the any non-compete agreements, and discuss with you whether a severance agreement is a good option for your circumstances.  Every agreement, and every person, is different, and it is important to speak with an attorney that understands how unique every situation is.

You can contact Attorney Dan Myers at Myers Law, LLC at:

Myers Law, LLC

600 East Granger Road, 2nd Floor

Cleveland, OH 44131

Phone:  216-236-8202