Top 5 Reasons Not to Sign your Severance Package Without Obtaining Legal Advice
October 30, 2019 By: Andrew Montague-Reinholdt Read Time: 4 minutes
Print

You have just been called into a meeting with your boss and told that your employer is terminating your employment.

signing severance package

A severance offer is a contract, usually drafted by the employer’s lawyers or human resources team, meant to reduce its financial and legal risk.

Your boss then hands you a letter that sets out a severance package containing various financial payments they say you are entitled to. They put in a tight deadline for you to sign and return the severance package. They may have also made allegations about poor performance or cause, but nonetheless offered you financial compensation. They then send you on your way to go decide whether to sign the severance documents.

If you are in this situation, it is very tempting to just agree to whatever they offered you. You have just lost your job, you are worried about your finances, and by agreeing to the severance package you will get some financial certainty as to what you will receive. You may also assume that what is being offered to you is fair, or even better than what you think you are entitled to.

However, tempting as it may be, DO NOT sign that severance offer without receiving legal advice. The following are just five (of the infinite number) of reasons you should not sign a severance offer without seeking legal advice:

1) Employers are trying to protect themselves, not you:

  • A severance offer is a contract, usually drafted by the employer’s lawyers or human resources team, meant to reduce its financial and legal risk. It is a wholly one-sided document meant to protect the employer from you suing them, at the lowest possible cost.
  • Severance packages almost always include a Release that needs to be signed in exchange for the money. The Release is a contract that is designed to ensure that the severance package is final. Once signed, you are releasing the employer from basically any legal action you could take (whether or not you know about the claim at the time). While there are some rare exceptions to the rule, there is very little that a lawyer can do to help you improve your severance package if you have already signed and returned a Release.
  • As such, before signing this document, it is important that you have your own lawyer, who is concerned with protecting you and your interests, review the document.

2) The timelines are artificial and meant to pressure you:

  • One reason you may be reluctant to see a lawyer is that the employer has put a deadline to agree to the severance package and you do not want to let the severance offer expire after the employer’s deadline. Do not worry about this. This is usually a legally irrelevant deadline only meant to pressure you into agreeing to a deal that is less than what you are owed.
  • While you should still act diligently to get legal advice after termination – because there are sometimes tight timelines to bring certain legal claims – employers are almost always willing to extend that deadline if you ask. And if they refuse to extend the deadline, it is usually as a pressure tactic to get you to agree to an unfair package.
  • In any event, our team is used to tight deadlines and meeting with someone quickly, even sometimes the day you call us, so do not let the employer’s artificial deadline stop you from making an informed decision.

3) Even well-intentioned employers make mistakes:

  • Larger and smaller employers make mistakes. Even though they should be taking the utmost care in how they are treating someone on termination, errors do occur. I have seen various mistakes over the years that have negatively impacted a terminated employee’s entitlements, including errors with respect to an employee’s years of service, the employee’s compensation, and the employer’s obligations under the Employment Standards Act, 2000 (and other legislation).

4) It is not always about the money:

  • While the financial components of a severance package are generally the most important parts, they are not the only issues with which you should be concerned. Lawyers can help you negotiate these items, including continued benefit coverage, reference letters, tax treatment for your severance package, pension rights, language to be used concerning the announcement of your termination, outplacement counselling, and many other things you may not be thinking about at the time of termination.

5) This may be one of the largest transactions of your life:

  • Often, especially for longer service, older or higher paid employees, next to buying a house, a severance package can be one of the largest financial transactions of your life. You are often agreeing to receive a large lump sum or regular payments, with various strings attached. When someone purchases a house, they work with a realtor and home inspector to make sure that they are agreeing to a fair deal. Similarly, employment lawyers are there to help make sure you are being treated fairly.
  • This is particularly important because a termination is an incredibly stressful event that clouds someone’s judgement. A person’s employment is amongst the most important relationships in their life, and the loss of that can be incredibly traumatic and chaotic. As such, most employees are not in the right head space to make an informed decision about what is or is not fair in terms of a severance package. Let us help you with this aspect of your termination.
This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2019 Nelligan O’Brien Payne LLP.

Enjoy this article? Don't forget to share.