Question: My employer was purchased by a competitor, and a large group of us were chosen for layoff. As part of the severance offer, I have to sign an agreement. One of the sections of the severance agreement has the title “No Re-Hire; No Application.”

It says that I will never again “seek to regain employment by the Company or any company that is affiliated with the Company.”

I haven’t done anything to deserve this, and so I am wondering why they would take that attitude toward me. It’s bad enough to lose a job, but this seems insulting. Have you ever seen this before?

Fiona
Elgin, Illinois

Answer: Dear Fiona: This is not the first time I’ve received almost this exact question. It seems like more of a kick in the pants than a reasonably gentle “goodbye.” Hopefully my explanation shines a bit more light on the otherwise troubling clause.
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“I never understood why Clark Kent was so hell bent on keeping Lois Lane in the dark.”

– Audrey Niffenegger

ACTUAL “CASE HISTORY”: Many employment-related agreements contain a clause in them that say, in one set of words or another, “You agree to keep the existence of this agreement, and the terms of this agreement, confidential.” Most commonly we see such clauses in (i) employment agreements, (ii) severance agreements, (iii) retention agreements, and (iv) bonus agreements (most commonly sign-on bonuses.)

What’s the purpose of the clause? This clause is most commonly inserted into agreements when in two situations: (a) when the employer does not want other employees to know that you received “special treatment,” in fear that the other employees will want the same “special treatment,” or (b) when the employer does not want you to find out that other employees received much better treatment than you are getting, in fear you will ask for what they received. If what you received, is kept secret, then no one will know the difference.

LESSON TO LEARN: It is always best for employees to “understand the game being played,” because “Forewarned is forearmed,” “Knowledge is power,” and “It’s good to know a lawyer.” If you encounter this contract clause, you would best served if you were aware of certain points, exceptions, and possible ramifications. Here they are.

WHAT YOU CAN DO: If you encounter the “You must keep the existence of this agreement, and the terms of this agreement, confidential,” in an agreement you are given to sign, bear these seven points in mind: Read the rest of this blog post »

Question: Last year, I hired an attorney to help me negotiate my severance package. When we were finally finished, I asked for one more thing: that my employer also pay my attorney’s legal fees. They agreed to pay the first $5,000 of the legal bill.

Recently, I received a tax Form 1099 saying that I was responsible for paying income taxes on that $5,000. Is this right?

Ashley
Pensacola, Florida

Answer: Dear Ashley: I am not a trained and experienced tax attorney, so I don’t offer tax advice. But, on this point of tax law, because it is related to severance, I can give you a clear answer: both you and your attorney must pay taxes on the same $5,000. Here’s why:
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Question: In January, 1998 I signed a severance agreement with a former employer that precludes me from applying for employment with that company or its affiliates. It says “ Employee also agrees in the future not to reapply for employment with the  Company or any of its affiliates.”

I was not dismissed for cause or misconduct, nor had I filed a discrimination complaint. At the time, my boss (a co-worker) decided to outsource my responsibilities.

I would now – 16 years later – like to apply for a job opening with one of the affiliates. Is the “not to reapply” term legal? Might the 16 years made the agreement “stale?” How do I best proceed to have it revoked/rescinded?

Thank you for your help!

Dennis
Milwaukee, Wisconsin 

Answer: Dear Dennis: I fully understand your predicament, your concern, and your question, because over the years many people have asked me the same question. For the reasons explained below, it is most likely that you have nothing to worry about it, and should just apply for the job. Permit me to explain: 

1. “The “No Re-Apply” clause in your severance agreement is a very common clause in severance agreements, but also commonly misunderstood. In my experience over many years of negotiating severance agreements, I have found such “No Re-Apply” clauses like yours in perhaps 50% of severance agreements. It serves a purpose for employers, and that is why it is in severance agreements, but its meaning and purpose are not understood by many people. In fact, I do not believe that most Human Resources representatives understand it, either.    

Want to ask for better severance? Use of our most popular model letter: Model Letter Requesting Additional Severance. It shows you “What to Say and How to Say It.”™ To obtain a copy, just [click here.] Delivered by Email – Instantly!  

2. The “No Re-Apply” clause is not personal, but definitely makes many laid off employees feel rejected and defensive, and leaves them wondering. Just as you seem to have wondered for 16 years, “What did I do wrong to deserve such seemingly permanent rejection?” many employees feel quite alienated by seeing this clause in their severance agreements. It is interesting to me that, after all these 16 years, you remember it, apparently word-for-word. I assure you – and everyone who reads this blog post – that 99.99% of the time it has nothing to do with you personally. You did nothing wrong or deserving of such rejection-sounding words.

3. The “No Re-Apply” clause is nothing more than an attempt by employers and their lawyers to avoid future lawsuits by employees who were paid severance. The phenomenon of employers giving severance to their terminated employees became widespread in the early 1980’s when (a) computers began to replace employees, (b) jobs began being shipped overseas, and (c) many of our anti-discrimination laws were passed. To reduce the many employee lawsuits that were then arising from the many laid off employees, employers started to offer severance packages to employees, BUT ONLY IF the employees signed releases of claims and waivers of lawsuits. In fact, “give-a-release-get-a-severance-package” is the essence of severance: it is to eliminate employee lawsuits. 

But you must understand one important detail: a release of claims works only to release claims that existed at the time of its signing, in the past, but does NOT apply to claims that arise after its signing. Said differently, a release of claims works “retroactively” not “prospectively.” 

Sure enough, a few employees (1) signed releases of claims, and (2) then received severance packages, and then (3) went on to apply for new jobs with the same employer, and then (4) when not hired, claimed discrimination in hiring, and (5) sued anyway. Ouch!! The whole idea of giving severance in the first instance was to avoid lawsuits. That gave birth to the “No Apply – No Hire” clause.    

We offer a 94-Point Master Severance Negotiation Checklist to make sure you don’t miss any severance-related issues or fail to spot problems in severance agreements. Sure helps to reduce anxiety! To obtain a copy, just [click here.] Delivered by Email – Instantly!

4. However, if Employer and Employee agree on one thing, Employer and Employee can agree to change their minds, too. Imagine, for the moment, that Norman and Nancy are married, and get divorced. Imagine, also, that they sign an agreement that says, “Norman promises never to ask Nancy to marry him again, and Nancy agrees never to marry Norman again.” Now, what happens if over the years they miss each other, don’t find new marriage partners, and both change their minds? Can Norman and Nancy remarry? Of course they can, no matter what they agreed years earlier. 

It is the same exact thing between employees and employers: if they later find each other particularly “attractive,” they are free to change their minds, and return to their former relationship, just as Norman and Nancy did. For this reason, if you and your former employer’s affiliate now want to enter into a new employment relation, you and they are entirely free to do so, regardless of what they agreed to 16 years earlier. 

5. Moreover, I sincerely doubt that anyone but you (a) still has a copy of your severance agreement in their files anymore, or (b) remembers the “No Re-Apply” clause, after 16 years. In my experience, rarely if ever does any employer maintain records for more than a few years. Even if someone at your former employer’s affiliate has a copy of your severance agreement, I strongly doubt that they will read it over carefully, and I even more strongly doubt they will care what it says. 

Is it possible that someone will say, “Sorry, Dennis, you agreed not to apply again”? Yes, but highly unlikely. Is it possible someone will say, “Dennis, you violated the agreement; now pay back your severance”? If there is a chance, I put it at one out of one hundred thousand. In my estimation, there is almost zero chance of anyone knowing, caring or acting against you for applying for a job, now, 16 years later. 

While nothing in life is guaranteed, my view is that you have everything to gain, and quite-near-zero to lose by re-applying. Hey – if they say, “Dennis, you violated your severance agreement,” just send them a copy of this blog post. I think that would educate them, and they will then simply decide if you are the applicant with the skills, experience and demeanor they seek.  

6. Incidentally, the 16-year passage of time does not make the agreement “stale” or otherwise unenforceable. As to your question about the passage of time, I know of no legal “time limit” argument that the 16 years makes the provision you agreed to somehow either “stale” or unenforceable. There are three reasons for this: (i) first, there is no time limit agreed to, that is, it says in the future,” and does not incorporate a specified time limit, such as “six years.” (ii) Second, our legal “time limits,” called “statutes of limitation,” begin to run from the time that a contract breach or violation of law take place, that is when a “legal claim” arises. Here, no one has breached anything, or broken any law. (iii) Finally, no Court can force someone to hire you against their will, making any legal action simply unavailing. 

By the way, we now offer by PDF (paper printed from your printer) or DIGITAL DOWNLOAD to your tablet my classic, “Fired, Downsized, or Laid Off,” what many consider the unofficial “bible” of how to negotiate severance. If you would like to obtain a digital copy for your tablet, just [click here.]

Dennis, I hope this explains that you did nothing to “deserve” the “No Re-Apply” clause 16 years ago, and that it should not pose a burden or barrier to you now. Gosh, 16 years is a long time to wonder. Good luck in your job quest!

My Best,
Al Sklover 

P.S.: One of our most popular “Ideal Packages” of forms, letters and checklists is entitled “Ultimate Severance Package” consisting of four Model Letters/Memos for severance negotiation, as well as our 94-Point Severance Negotiation Checklist.” To obtain a complete set, just [click here.]           

Repairing the World,
One Empowered – and Productive – Employee at a Time™

© 2014, Alan L. Sklover All Rights Reserved. Commercial Use Prohibited.

Question: I am a Director of Clinical Research at a start-up medical device company making a very healthy salary. I have had excellent performance reviews and no problems. I was laid off last week with the statement “You are an exceptional employee and met/exceeded all expectations, but we are replacing you with another woman from where I previously worked.” 

I was offered 8 weeks severance. My state is an “at will” state, but this seems a very small severance for my level. It will take me months to find a job. 

What can and should I ask for when I send a letter back to negotiate? 

Mindy
Lakeville, Minnesota 

Answer: Dear Mindy: Your letter illustrates a number of important thoughts for people faced, as you are, with being laid off, and the need to negotiate severance for yourself.   

1. One thing you need to understand, first and foremost: severance is not paid out primarily based on how much you need it. Having worked with fired, downsized and laid off employees for over three decades, I know that every laid off employee feels, first and foremost, financial insecurity. How am I going to pay the bills? What if it takes me years to replace this job? What can I cut in our family’s budget that is not already cut “to the bone?” Those thoughts, however, are not helpful; what is more helpful is focusing on what might motivate your employer to give you more severance.  

The number of weeks or months of salary and/or benefits you ask for as your severance will not motivate your employer to give you more severance; instead, your employer will focus on this: why it may be good for him or her to do so. This is key to keep in your mind.    

2. You mention three things that you believe justify greater or “better” severance: (i) your excellent performance; (ii) your “level,” and (iii) the difficulty in finding a new job. Each of these things may be presented as reasons to give you more severance, but based on my experience, your employer’s probable response to each one – whether said or thought – will likely be, corresponding to each of your three reasons noted above, (i) her job was to do excellent work, (ii) because her severance is based on her high salary, her severance does already reflect her “level,” and (iii) it is hard for everyone to find a job these days.   

As I noted above, what you ask for in severance should be tied to what your employer is concerned about, not what you are concerned about. In other words, the facts you provide in your note to me are not as helpful in determining what is reasonable in your situation to ask for as severance, as would be thoughts that might make your employer consider (a) whether it is possible that there is something they can give you that they can more readily afford to provide, (b) whether there is some interest they might have that would be improved by them providing you better severance, and (c) whether it is possible that, if they gave you better severance they might save in legal expense and possible “disruption.” 

3. I urge you to consider non-monetary severance requests, in addition to monetary ones; though they can’t be used to pay the rent or mortgage, sometimes they are of equal or greater “value” in the long run. In my book “Fired, Downsized, or Laid Off,” I devote an entire chapter to 110 different – but valuable – “non-monetary” requests I have successfully negotiated for my clients. They might include such things as (a) a positive reference, (b) permitting you to retain a laptop computer, cell phone, tablet or other equipment you have used, (c) payment of some of your COBRA health insurance premiums, (d) agreement to permit you to retain copies of research you have done in the past to serve as “portfolio” material to show future potential employers, (e) proactive assistance in helping you locate and secure new employment, (f) vesting of unvested stock or stock options previously awarded, (g) release from a non-compete agreement, and (h) agreement that, if your successor does not work out well in your position, you will be rehired or at least reconsidered.  

We offer a 94-Point Master Severance Negotiation Checklist to make sure you don’t miss any severance-related issues or fail to spot problems in severance agreements. Sure helps to reduce anxiety! To obtain a copy, just [click here.] Delivered by Email – Instantly! 

You might even consider asking if you can “volunteer” in the meantime in research, grant-writing, or business development where you would get a percentage of the revenue you brought in, giving you the appearance of being employed, and possible payment, both without extra cost to your employer.     

4. There are six factors you should use to determine what severance to ask for, because it is these six factors that might get you more severance: 

(i) Is there anything you might be able to do to assist your employer in the future, such as being available to transition to your successor your duties, your relations and your “legacy” knowledge – that might be worth paying you more severance, or delaying your anticipated departure?  

(ii) Has your employer failed to honor any expression, commitment, assurance or promise of any kind that you relied on and now justifies your request for payment for it now? To eliminate the issue and its possibly attendant legal costs to resolve, your employer might offer to compromise with you on it.

(iii) Is there any chance the decision to replace you was based on an improper motivation, such as your age, pregnancy, religion, race, disability or the like? Same thing here: if you believe the underlying motivation might have been improper, your employer may well be interested in resolving the matter by providing greater severance.

(iv) Has your reputation been harmed by anything that your employer’s executives have said or done? Same thing here.

(v) Is there any chance you have been chosen for layoff because you objected to wrongdoing, dishonesty, impropriety or illegality, and then been retaliated against by your termination? In my experience, sound allegations of retaliation are usually the greatest motivator for improved severance. 

(vi) Finally, if your family is in unusually difficult circumstances – such as a gravely ill child or a parent undergoing expensive chemotherapy – that may create empathy that might translate into increased severance payment, or one of the “non-monetary” types of severance noted above. 

Using these things, I would suggest you consider (a) what more monetary severance seems appropriate. To me, depending on how long you’ve been with your employer, I think six months might be a good place to start – including salary and benefits, and perhaps importantly, the vesting of any unvested stock awards that may have been made to you. Of course, the greater “leverage” in the six kinds of leverage noted above, the more you can ask for. 

I’d also suggest you consider the various types of “non-monetary” awards you might seek, as employers are always interested in providing things that do not cost them, or do not cost them too much. 

To request more or better severance, you might want to obtain a copy of one of our most popular model letters: Model Letter Requesting Additional Severance. It shows you  What to Say and How to Say It.”™  To obtain a copy, just [click here.] Delivered by Email – Instantly! 

Mindy, I hope this is helpful to you, and that you will be guided more by your leverage and facts of your matter than you are by “what I need.” Please consider telling your friends, family and colleagues about our blog – we’d REALLY appreciate that!!

My Best,
Al Sklover

P.S.: New! We now offer by either (a) PDF from your desktop printer, or (b) digital download to your tablet a copy of my well-regarded book, “Fired, Downsized, or Laid Off,” the unofficial “bible” of how to negotiate severance. If you would like to obtain a digital copy for your tablet, just [click here] or for your desktop printer, just [click here.] 

Repairing the World,
One Empowered – and Productive – Employee at a Time™

© 2013, Alan L. Sklover All Rights Reserved. Commercial Use Prohibited.