I appreciate feedback here. As someone who has been on the
issuing end of many termination letters, I find the one I am about
to reference to be suspect. It was recently given to a close friend
of mine along with a Severance Agreement and standard release
of claims. The letter I am referring to presently is the "Transition
Letter". I will outline the highlights and any feedback is
appreciated:
1. Entitled "Transition Letter" issued to a full-time (highly
compensated) hourly employee that regularly receives a shift
differential of 15% as well as overtime (works 3 X 12 hour shift one
week, 4 X 12 hour shifts the next, this is by definition a
requirement of the job).
2. Essentially explains that a layoff is taking place. Standard
language.
3. Defines the "transition period" as today (1/19/05) through
5/2/05. Indicates that employment will be terminated on
5/2/05. Indicates that severance benefits will be provided as
outlined below.
4. Requests reasonable actions during transition period such as
transitioning duties, knowledge, etc.
5. Offers in exchange for continued services during the transition
period:
- "We will continue to pay your current salary, less applicable
withholdings and will be payable in accordance with the Company's
normal payroll procedures, for a period of Twelve weeks following
termination of your employment."
- "The Company will also provide health and welfare benefits to you
through the month in which you are terminated."
6. States that "in order to receive these severance benefits, you
must sign the enclosed Severance and Release Agreement prior
to your last day of employment with the Company."
7. States that additional transition benefits will be provided such
as outplacement assistance, etc. These will be provided for the
final
two weeks of employment.
8. States that in order to receive above-described severance and
transition benefits, this transition letter (not the Severance
Agreement) must be signed and returned in approximately 10 days from
now.
9. States that premature termination (other than for cause) will
still
be eligible for the same benefits and severance described.
10. States that the transition letter does not negate that "at-will"
employment relationship and does not imply a contract of employment.
11. The signature page requires affirmation of a statement to this
effect:
- "I will continue to work for the Company during the Transition
Period starting on 1/19/05...I understand that...the Company will
provide me with severance and transition benefits that are described
in this transition letter in exchange for working through the
Transition Period... I also understand that I must sign the enclosed
Severance and Release Agreement upon termination of my
employment in order to receive the indicated severance and
transition benefits...If the Company Terminates my employment
[for cause]... I will only receive my normal base pay for the time
worked and my employment will be terminated."
QUESTIONS
A. Isn't this odd? Or is this standard practice for entering a
"Transition Period"?
The Transition Letter lable is just a lable. This is simply advance
notice of termination. It could have been called a termination
agreement. The lable means nothing. It is not standard practice to
fire someone or lay someone off with 3.5 months of notice unless there
is an employment contract, or a union contract, or a state law which
requires unusual advance notice for a plant closure. But even without
those triggers, it sometimes does happen that the employer gives
unusual notice of termination. I don't see anything suspicious about
it.
B. Why sign the Transition Letter months prior to the Severance
Agreement? Does this provide significant loopholes for the Company
to not payout Severance?
It is best for the company to get the release signed immediately.
That release is the primary reason for all of this generous pay. If
they didn't want the release, the person would be dumped today at 5:00
p.m. So the employee should consider what claims she is releasing.
If she can't think of anything, then she has the option of going to a
labor litigation attorney to get some help in indentifying potential
claims, or just accept the company's generosity.
Getting the release signed in advance creates no loopholes that I can
see, and there is a good reason for it. Therefore, it isn't
suspicious.
C. Since the person affected has always received a shift
differential and overtime, should she be eligible to receive either
during the 12 week payout? This is the difference between
considering her annual earnings to be $60k and $85k.
With nothing said in the letter about shift differential or overtime,
she should assume she will be getting both, and not let that affect
her decision to sign. After receiving final-final pay under the
agreement, she can go to the labor commissioner for any unpaid wages,
or sue them in small claims for breach of the agreement.
D. I read this as a 12 week continuance of pay, not in lump sum.
Does that sound right?
It is not a lump sum. It is either a 12 week deal or a 24 week deal.
Notice that Item 5 calls for 12 wees pay "following termination of
your employment." Termination of employement is 5-2-5.
If they ment to write a 12 week deal and actually wrote a 24 week
deal, maybe it would be good to sign it fast, before anyone has a
chance to correct the language.
Are there special considerations / implications for
that versus a lump sum payment?
Nope. It just means that the employer gets 12 more weeks of work out
of the person, which they apparently want, and it saves them some cash
flow impact.
E. All I want to ensure is that she gets a decent deal. I think this
is
a fair enough deal on the surface.
This is a very generous deal if she doesn't have any claims. If she
has good claims, as in big and provable, then it may not be generous.
It has been and is a rotten company to work for, not very
trustworthy, but if they follow through on this offer it is more
than
she would have expected. Does anyone see any
significant red flags for a suspect company to utilize as an
opportunity to get out of the severance obligation?
Notice that the signature page requires her to sign the relase "upon"
termination, while an earlier provision requires signature before the
end of the transition period. I suggest that instead of getting that
clarified, she should simply sign it well before termination. Like
maybe, as soon as possible, to prevent missing the deadline and to
prevent clarification of the 12 vs 24 week issue.
One other thing. The letter has to qualify as a contract when the
employee signs. I haven't seen it all, and you didn't say whether it
was signed by an authorized person. If the letter is valid as a
contract, I don't see any red flags. If it is not signed, the
employee (obviously) should not sign the release yet.
Other than those two things I don't see any problems. Assuming (a)
she has no potential claims, (b) the company isn't paranoid about
potential claims, and (c) you didn't le
