Severance refers to money and/or benefits an employer offers when ending an employee’s job. It’s often designed to help with the financial transition that follows a termination. Severance may include benefits such as a lump-sum payment, extended health insurance, and job placement assistance, depending on the specific circumstances.
Many people assume that severance is automatic, but that’s not always the case in reality. Employers aren’t required by law to provide severance pay unless it’s promised in some way, like in a contract or collective bargaining agreement. Oftentimes, severance packages are offered voluntarily, such as part of a negotiation when employment ends.
How Severance Works in Arizona
Arizona is an “at-will” employment state, meaning employers can terminate workers for almost any lawful reason. As a result of that framework, severance is generally a matter of agreement, not entitlement.
When an employer offers a severance, it usually comes with strings attached. Most agreements require the employee to sign a release of claims, waiving their right to sue for issues such as discrimination.
It’s essential to thoroughly understand what you’re giving up and the implications before signing an agreement like this. Once you accept a severance and sign the release, you often lose the right to pursue any legal action related to your employment.
What Severance Packages Can Include
A severance package can cover much more than just a single payment.
While every agreement is different, it may include:
- Lump-sum or continued salary payments for a set number of weeks or months
- Payout of unused vacation and PTO
- Extended health insurance benefits through COBRA or company coverage
- Outplacement services to help you find a new job
- Non-disparagement and confidentiality clauses
- References for future employers
Employers often tailor these terms to the unique circumstances of the employee in question.
Negotiating a Severance Agreement
Although Arizona law doesn’t require severance, you can often still negotiate for one, especially if you have leverage that you can utilize. For example, an employer might offer or increase severance pay to avoid potential legal disputes in the future.
Here are a few points to consider during these negotiations:
- Review the agreement carefully: Don’t sign anything immediately; you have the right to review the terms and ask questions.
- Identify your leverage: If your firing seems unfair for any reason or if you’ve been a long-term employee, you might be in a stronger position to negotiate.
- Ask for more than money: As discussed above, you might also be able to seek references and other benefits.
It may make sense to hire an employment attorney to represent you during these negotiations, as the stakes could be high and impact your future dramatically. At the least, setting up an initial consultation with a lawyer is likely in your best interest.
Federal Rules That May Apply
While Arizona doesn’t have a specific severance law, certain federal laws can affect how severance is handled.
For instance, under the Older Workers Benefit Protection Act (OWBPA), employees over 40 must be given at least 21 days to review a severance agreement and 7 days to revoke it after signing. The law ensures older employees aren’t pressured into giving up their rights without proper time to decide.
Additionally, if the employer is reducing staff on a large scale, the Worker Adjustment and Retraining Notification (WARN) Act may require either advance notice or compensation in lieu of that notice.
Common Legal Issues in Severance Agreements
Severance agreements can contain clauses that limit your rights, so it is important to carefully consider what’s on the table before signing anything.
Common issues that may appear include:
- Broad release of claims: You may waive the right to sue under employment and discrimination laws.
- Non-compete clauses: These can restrict your ability to work in the same industry and/or geographic area.
- Confidentiality provisions: These may prevent you from discussing your employment experience or the agreement terms.
An employment attorney can help you identify any of these red flags and others before you sign the document.
Contact the Phoenix Employment Lawyers at Houk Employment Attorneys for Help Today
Losing a job can be one of the most stressful experiences imaginable, but you don’t have to navigate the subsequent severance negotiations without a lawyer on your side. Arizona law gives you the right to review the agreement in full and seek legal advice before agreeing to anything that affects your future in such a drastic way as this.
If you’ve been offered or denied a severance package, Houk Employment Attorneys is here to help. Our experienced Phoenix employment attorneys can help you understand your rights, evaluate your agreement, and protect your financial and professional interests before you make a final decision. Contact us today at (480) 569-2377 for a confidential consultation.
