Retention Agreement Contain a Release? If So, It Just Might Be Your Severance

“Don’t tell me of deception.
A lie is a lie, whether to the ear or to the eye.”

– Samuel Johnson

ACTUAL CASE HISTORIES: Likely due to recent news about shortages of qualified employees, more and more employers are using retention agreements to retain their employees during periods of insecurity, such as mergers, divestitures of company divisions, periods of lowered revenue as well as in event of rumored layoffs.

In my decades of practice, I have negotiated many retention agreements. The essence of a retention agreement is pretty simple: It is “You stay, they pay.” Or, in more legal-sounding language:

    “If (a) you promise to, and do, remain as an employee for a certain, specified period of time, then (b) the employer promises to pay you a certain, specified sum of money.”

Retention agreements do not contain “releases” or “waivers” of claims. There is no reason for them to contain releases or waivers of claims. Releases or waivers of claims have no place in retention agreements. The essential requirements are (i) you agree to stay, and if you do (ii) they pay you a specified sum of money. No releases. No waivers. No reason for them.

In my decades of practice, I have also negotiated many severance agreements. The essence of a severance agreement is also pretty simple: “You release them from claims and lawsuits, and they pay you a certain, specified amount of money and certain benefits.”

In severance agreements, there always needs to be a release or waiver of claims because that is a fundamental part of the severance transaction. You might say that is exactly what the employer is “buying” in the bargain. In more legal-sounding language, this is what a severance agreement says:

    “If (a) you promise to, and do, release and waive your claims (and possible lawsuits) against your employer, and perhaps do certain other things, then (b) your employer will pay you a certain sum of money.”

It is here – in severance agreements – where we expect to see releases and waivers of claims because they are part of the very essence of a severance agreement.

Retention agreements and severance agreements are two different agreements, meant to accomplish two different goals, and each (i) rewards, and (ii) obligates employee in two very different ways.

There is no rule or law that says that retention agreements and severance agreements cannot be placed into one single “Retention and Severance Agreement.” I have seen just that, in which the two offers exist in the same document in a way that expresses:

    (a) If you stay a certain period of time, we will pay you $25,000 for not leaving (retention); and
    (b) If we should lay you off during that period of time, we will pay you a severance of $80,000 for signing a release of claims (severance).

Notice that you should be paid for staying put, and you should get paid additional monies for the release of claims provided. Notice, too, that you should not provide a release of claims for the retention, but for the severance.

I have no problem seeing a combined retention-and-severance agreement. I do have a big problem with a deception that gets the employer the right to lay you off with no payment, other than a payment that you have earned for agreeing to remain in place during insecure times.

In recent times, I have seen employers mix the two (retention and severance) together without telling the employee, and without paying the employee for the release, which is very valuable, and thus taking wrongful advantage of the employee. It’s like getting a release for free, under false pretenses. Lured by the sound of “free money” for the retention, the employees do not even realize they are effectively also signing a severance agreement.

The first time I saw this deceptive variation of a retention agreement, I said to myself, “What is this???” It took me a few minutes to figure out what it was, and what it represented to my client, what it offered my client, and more importantly, what it “took” from my client. Now I am seeing this “deceptive hybrid” retention agreement more and more, and I have come to understand their deceptive danger to employees.

LESSON TO LEARN: There are three important lessons to learn in this circumstance, one quite simple, and one quite sophisticated.

    1. First Lesson: “Titles Don’t Count.” Just because a document’s title is “Retention Agreement” does not make it a Retention Agreement, or only a Retention Agreement. What is “inside” the document is what counts. You have to read every word of an agreement before you understand it, and you should never sign an agreement unless you fully understand it. If you don’t understand what it says, and understand what it both “gives” you and “takes from” you, keep your hands and your pen in your pockets.

    2. Second Lesson: “True Retention Agreements Do Not Contain Releases.” If you are reviewing a document entitled “Retention Agreement,” and you see in it a release or waiver of claims in it, “beware.” It may not at all be what you expect. While retention agreements are often seen as positive opportunities to make extra money, severance agreements mean something far less positive: you will likely soon to be losing your job, and that is worrisome.

    3. Third Lesson: “A Retention Agreement Containing a Release May Be a Disguised Severance Agreement.” The fundamental reason an employer gives money to an employee who is being downsized or laid off is not love, and it is not concern for his/her well being. Rather, it is to “buy” a release or waiver of claims, to reduce the risk of a lawsuit to the employer. Now here is the thing I hope you will remember most: If the employee recently gave to the employer a release or waiver of claims, the employer does not need to give the employee any severance payments or benefits in return for another release: it just got what it needs and wants.

So, if by means of a retention agreement, an employee has unwittingly recently given an employer an release or waiver of claims, that retention agreement may just be a disguised or mislabeled severance agreement, and a layoff – without claims or defenses to it – may be “just around the corner.”

WHAT YOU CAN DO: We recommend consideration of these eight thoughts if you are given a document called a “Retention Agreement” that contains a release of claims or waiver of claims:

1. Always bear in mind that, if someone comes to you and asks you to sign something, you have something unique they want – your signature – and thus leverage to negotiate what they offer you. I call this leverage “Who Came to Who?” leverage. It is a basic lesson of negotiation. It means that you have something that they want enough to offer to pay you for it. And you can bet in any “Who Came to Who?” situation, the person who came to you is offering less than they are, eventually, willing to pay. They think they are getting the better side of the deal; why else would they be proposing it?

Want to propose a Retention Bonus? We offer a Model Memo entitled “Model Memo Proposing a Retention Bonus or Arrangement,” to send to your Manager when you believe your Manager views your possible departure to represent a risk to him, her or the company. “What to Say, and How to Say It,™ just [click here.] Delivered by Email – Instantly!

2. Read your retention agreement carefully, looking out for a Release or Waiver of Claims, or words to that effect. Simply put, and regardless of what the agreement title or paragraph title may be, only the actual words and phrases count

What words or phrases? Look for words that sound or function like a release or waiver of claims. These are the ones I would suggest you look out for: “claims,” “release,” “releasor,” “releasee.” A different phrase – but that acts in the same way – is a “covenant not to sue” or a “promise not to sue.” Also, look out for “obligations,” “judgments” and “damages,” which are words seen in releases and waivers, that is, that belong in severance agreements, and that have no place in retention agreements.

3. Consider whether the Retention Agreement offers you sufficient money to make it acceptable . . . even if you lose your job the next day. Hey, if your Retention Agreement offers you one, two or even three years of your full yearly compensation, it just might be worth signing, even if it does, in reality, represent a severance agreement and you get laid off the day after you sign it.

Is that scenario likely? Probably not. Is it possible? Absolutely. And, that seems to be the “trick” that is being presented increasingly by more and more employers. All that said, I would not automatically shut my eyes to the potential value of such a large payment; it just might be worth signing no matter what it says . . . PROVIDED, of course, it is written with enough certainty and clarity to be unquestionably enforceable.

4. If you do find language of release or waiver of claims in your retention agreement, consider asking for the problematic language to be deleted. In two recent instances, when my clients requested the removal of the language that gave the employer the release and waiver of claims, the employer simply did just that. At least for these two clients, if they are downsized or laid off in the future, they will likely receive severance payments in return for signing a release or waiver of claims.

Consider our Model Memo entitled “Memo Requesting Changes to Retention Bonus Agreement.” With 8 of the most common requests for improvements. “What to Say, and How to Say It,™ just [click here.] Delivered by Email – Instantly!

5. If you do find language of release or waiver of claims in your retention agreement, also consider asking for additional compensation in exchange for signing it. I have not yet had a client be successful in obtaining, in effect, “pre-emptive” severance monies in this way, but it is a logical thing to consider requesting in this circumstance.

6. If you do find language of release or waiver of claims in your retention agreement, consider asking that, if you are terminated without cause within, say, a year, then you will get severance payments of no less than a certain sum. This request is quite logical, and reasonable, and should be one of the requests you should consider. Trust me on this: they will know that you know what they hoped you did not know, and will respect you for it. That I promise. They might even ask you not to share that knowledge with your colleagues.

7. Don’t forget that signing a retention agreement will likely NOT obligate you to remain in place, but that you must do so only in order to receive the retention payment. I cannot promise you what will be expressed in any retention agreement, or how it may be expressed. As noted above, you must read it carefully, or have an experienced attorney review and analyze it for you.

But one thing I know about retention agreements is that most do NOT require you to remain in your job, but ONLY require you to remain in your job in order to get that retention payment. Thus, if your “dream job” is offered to you in the meantime, you may likely be free to just “walk” from it, and forego the retention payment.

8. Lastly, keep in mind a cardinal rule of negotiation: “Anything negotiated today can be re-negotiated tomorrow.” First, if halfway through the required “retention period,” you are offered a “dream job,” and are tempted to leave and thereby forego the retention payment, you are entirely free to say to your employer, “Hey, out of the blue I have been offered a great job by another employer. Might you be willing to increase my retention payment by, say, 50% to motivate me more to stay?

Second, if during your retention period, another employer offers you a new job that is very attractive, you are also entirely free to say to that prospective employer “Well, if I leave before September 15th, I will lose a retention payment of $25,000. Would you consider paying that amount to me as a signing bonus, to make up for my loss?”

As you can see, there’s lots of possible negotiating you can engage in to both protect yourself and advance your interests when presented a retention agreement.


In Summary . . .

Offered a purported retention agreement? Great; you just might get paid for staying put for a certain period of time. But, before you sign it, you would be wise to read it carefully for words or phrases that say that, as part of the deal, you also grant your employer a release or waiver of claims, judgments or damages, or that you promise never to sue them. If you do find such language, consider whether you want to go forward, or try to negotiate it. These eight suggest thoughts are not mandatory, but surely wise, and intended to spark your negotiating imagination.

P.S.: If you would like to speak directly about this or other subjects, Mr. Sklover is available for 30-minute, 60-minute, or 120-minute telephone consultations, just [click here.] Evenings and weekends can often be accommodated.

SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work. Negotiation and navigation of work and career issues requires that you think “out of the box,” and build value and avoid risks at every point in your career. We strive to help you understand what is commonly before you – traps and pitfalls, included – and to avoid the likely bumps in the road. For those presented with Retention Agreements, you need to do some “homework” to make sure you are on the better side of the bargain, or at least on a safe side, a necessary element of your employment “navigation and negotiation.”

Always be proactive. Always be creative. Always be persistent. Always be vigilant. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment “rewards” and eliminate or reduce employment “risks.” That’s what SkloverWorkingWisdom™ is all about.

*A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.

Please Note: This Email Newsletter is not legal advice, but only an effort to provide generalized information about important topics related to employment and the law. Legal advice can only be rendered after formal retention of counsel, and must take into account the facts and circumstances of a particular case. Those in need of legal advice, counsel or representation should retain competent legal counsel licensed to practice law in their locale.

Sklover Working Wisdom™ is a trademarked newsletter publication of Alan L. Sklover, of Sklover & Company, LLC, a law firm dedicated to the counsel and representation of employees in matters of their employment, compensation and severance. Nothing expressed in this material constitutes legal advice. Please note that Mr. Sklover is admitted to practice in the state of New York, only. When assisting clients in other jurisdictions, he retains the assistance of local counsel and/or obtains permission of local Courts to appear. Copying, use and/or reproduction of this material in any form or media without prior written permission is strictly prohibited. All rights reserved. For further information, contact Sklover & Company, LLC, 45 Rockefeller Plaza, Suite 2000, New York, New York 10111 (212) 757-5000.

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