You're fired! Cash in on your way out, Part 2
Not everything in a severance package is created equal. Some items are more negotiable than others-and when one door closes, another may open. Here's how to spot the difference.
Credit for contributions made or deals near closing is the number one issue for many financial services workers. Your company has no legal obligation to pay-but that doesn't mean they won't.
Judith A. Lockhart is an employment law partner at Carter Ledyard & Millburn LLP, a Wall Street firm which has handled employment contract disputes for Goldman Sachs and for many ex-Merrill Lynch executives. She says, 'An investment banker who has a bunch of ideas sitting out there or may have deals close to closing may be able to negotiate a largely discretionary bonus coming out of the earnings for that group.'
Timing is everything
What if your options haven't quite vested? Lockhart says, 'Companies sometimes allow people to stay on the payroll to allow options to vest.' In that scenario, you normally don't show up to work during the extension. Not so if you successfully bid to work as a less-than-full-time consultant for a certain duration, which is another way to meet the vesting deadline.
Your employer may require you to exercise options within a certain amount of time-30 days, for example-after you leave. You might be able to negotiate an extended window, in the range of six months to a year, if you believe the company's fortunes are about improve.
You should also look at the payout schedule of your severance plan. For tax reasons, you may want to push the bulk of your severance into the following year. Or, if you're worried about the company's solvency (or honor), you may want it all up front.
More negotiating points
- Noncompetes & nonsolicits: Too broad for comfort? Ken Taber, an employment law partner at New York's Pillsbury Winthrop LLP, says, 'While a senior executive may have a sweeping noncompete, the employer may only be concerned about a handful of sensitive accounts.' Seek a middle ground.
- Healthcare coverage: In the U.S., employers are required by the 'Cobra' law to continue healthcare for 18 months provided you pay the premium, but you can ask your employer to extend this period.
- New job penalty: Many severance payments stop once you secure a new job or go to work for a competitor. It may be possible to eliminate this provision.
- Reference letter: Taber says, 'The norm in these kinds of cases is that the departing employee drafts a to-be-agreed-upon reference letter which, as a general matter, will be accepted by an employer.'
- Help finding a new job: Ask for employment counseling, an outplacement service, or courses for further training.
What's not up for grabs
You're not going to get your old job back. Pillsbury Winthrop's Taber says, 'The only variation you sometimes see is that people might be continued as consultants.' Such arrangements are infrequent and typically last less than a year.
You'll also have less luck expanding benefits such as health and life insurance (versus extending the coverage period).
Finally, in a mass layoff situation, your employer may be reluctant to negotiate your package at all. Taber says, 'Often there's been a decision at the top saying these are the terms and we're not going to negotiate, even with a confidentiality agreement. But if there are facts and circumstances that make your case unique, that doesn't mean you shouldn't pursue them.'
'It's a lot like dating'
Though you'll certainly need a lawyer to review the final agreement, engaging one from the start will give you a tangible edge if you keep your hired gun away from the bargaining table as long as possible to avoid antagonizing your business group.
In New York, expect to pay from $350-600/hour for legal advice. At the high end, your fees may add up to $10,000 and significantly more if the negotiations are complex, which you should gauge against your potential recovery. Some lawyers may work on partial contingency (e.g., half off the hourly rate, plus a percentage of the recovery above your employer's initial offer).
Save your lawyer's number-you'll need it to negotiate your next severance package before you begin a new job. Lee E. Miller, a former employment lawyer whose New York-based company, NegotiationPlus.com, conducts negotiating workshops at financial services firms such as Bear Stearns, Citigroup, and HSBC. He says, 'It's a lot like dating. You are a lot more generous before you get married than when you're getting divorced.'
See related article:
You're Fired! Cash in on your way out, Part 1