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Outplacement Advice - Severance Packages - Do's and Don'ts

team of successful business people having a meeting in executive sunlit office.jpegLayoffs and terminations are never easy for anyone involved in the outplacement process. A key element of any involuntary termination is severance. There have been a lot of changes in recent years regarding severance packages ranging from the amount of money provided to whether they should be provided at all.

SHRM recently published an informative video on the do's and dont's of severance that we wanted to share. It provides a useful update to all HR leaders.

SHRM published an interesting article on May 25, 2017 titled :Tread Carefully Across The Severance Minefield.  In the article they primarily discussed severance from the position of litigation avoidance. In the opening paragraph they set the tone with the following quote:

"We live in a very litigious society, particularly in the employment space," says Jonathan A. Segal, an employment attorney with Duane Morris LLP in Philadelphia. "Employers can buy peace by providing severance or other benefits in exchange for a [signed] release" stating that the departing worker won’t sue the company.

The article pointed out that severance policy mistakes - often centered around the requirement of former employees to provide something in return for severance or other benefits - can create a potential litigation nightmare if the courts determine that the requested "quid pro quo" is excessive.

For example, last summer, the U.S. Securities and Exchange Commission (SEC) became the latest agency to punish employers for requiring workers who receive severance pay to waive their right to receive payment in legal claims. In rulings decided less than a week apart, the SEC directed Atlanta building products firm BlueLinx Holdings Inc. and California insurer Health Net to pay more than $600,000 to settle charges that their severance provisions violated securities law. In addition, BlueLinx agreed to stop requiring employees to get company approval before reporting possible SEC violations to the government.

The U.S. Equal Employment Opportunity Commission (EEOC) has also been looking closely at severance packages that require employees to give up their right to sue, and, in the end, employers may have to change their policies. Organizations that cross the line can face costly litigation. For example, in 2013, the agency won a landmark case arguing that the Illinois book distributor Baker & Taylor interfered with employees’ right to file a discrimination complaint with its "overly broad, misleading and unenforceable severance agreement."

Finally, guidance released by the National Labor Relations Board’s (NLRB’s) general counsel in 2015 stated that nondisparagement clauses and other provisions typically included in severance agreements are illegal because they violate employees’ guaranteed right to concerted activity.

SHRM also published the following video that outlined the do's and don't of severance. I found it interesting that they selected some of the most ominous soundtrack music for the presentation.



So where does this leave us today in regards to severance?

If goes without saying that HR should not be the sole owner of the the organization's severance policy. Legal will absolutely have to be involved.

Providing severance is still the right thing to do in regards to corporate branding, community standing, lower unemployment costs, and leaving former employees with some dignity and security. In a previous blog post, Outplacement With Dignity and Respect, we discuss how smart organizations can do this well.