Aug 18, 2022
Severance: Why experts say you should negotiate an individual package, even in a mass layoff
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Mass layoffs have swept the North American tech sector as companies look to rein in their spending as they face declining valuations, higher borrowing rates and an uncertain economic outlook.
For the affected workers, losing a job is a very stressful time and emotions can run high. However, while laid-off employees might feel pressured to take the severance package placed in front of them, employment lawyers say it’s important for workers to make sure the package is tailored to their individual entitlements.
“If you're laid off with 1,000 other people, you might think you have a lot less power to challenge the offer. But by and large, nothing has really changed. If you're terminated as one or 10 or 1,000, you can still negotiate terms of your own settlement,” Sunira Chaudhri, the founder of Toronto-based employment law firm Workly Law, said in a phone interview.
In recent months, tech firms large and small, including Shopify Inc., Hootesuite Inc., Wealthsimple, Clearco and Thinkific Labs Inc. have laid off hundreds, even thousands of staff members, citing reasons ranging from the slowdown in ecommerce to the need to tighten their finances in order to weather economic headwinds.
When companies conduct mass layoffs, Chaudhri warned there’s a risk the firm will deploy a formulaic, non-personal calculation with severance packages that might not take into account numerous factors such as your education, your unique skillset and how niche your role is, in addition to your years of service.
“When you're basically the victim of a calculator, you very well could be left behind and even though you may be offered something that's in line with what everybody else is being offered, that doesn't mean that it's fair in your like individual circumstances,” Chaudhri said.
A starting point when negotiating severance is to figure out what the priority is, Michelle Slater, a director at job search website Indeed, said via a phone interview.
She said while some workers might want the biggest financial payout they can get, others might prefer to have their health benefits extended or to receive assistance with finding another job. Stock options could also be a big factor in severance negotiations with tech companies.
“It's about more than money,” she said.
She also suggested researching what typical severance packages can look like for that particular role to help gauge what would make a “reasonable” request in discussions with the company.
“By having a little bit more information in your pocket before you started the negotiation, they can actually be in a stronger position,” Slater said.
Making reasonable requests on the financial payout and other benefits could encourage the former employer to work with the employee on severance terms, she added.
PRESSURE TO SIGN
Any workers who feel pressured by their employer to sign an agreement on the spot is a “huge red flag” for Rudner Law Partner Brittany Taylor.
“It's actually to your employer's benefit to give you time to consider the offer and speak with a lawyer because that's going to make it harder for the employee to come back down the road and argue that they signed under duress or that they didn't understand what they were agreeing to,” she said by phone.
She encourages laid-off workers to seek out legal advice to determine if their severance package is fair and not a “one-size-fits-all” agreement.
Having represented both employees and employers, she said she’s seen employers in the past hold some money back with the expectation that workers will try to negotiate for a larger settlement.
Taylor also added that, sometimes, packages that seem fair on the surface still might be deficient, such as in the case where the financial payout is only based on a worker's base salary and not inclusive of sales commissions.
“It's suddenly looking a lot less attractive. So it's important to slow down, get the advice, think about whether this makes sense. And if there is a huge [difference] between what your lawyer is saying you're entitled to and what's on offer, it is worth it to negotiate in most cases,” she said.
However, there are times when it might not be practical for the worker to negotiate.
If the package is fair and the worker already has another job lined up, it might not be worth the time delays to haggle for a larger severance on a practical basis, she said.