Severance Packages - To Sue Or Not To Sue

Let’s assume for the moment that you have just completed your 17th year of employment as a manager at a company when all of a sudden you are fired due to restructuring. Your employer is not alleging cause for your dismissal and thus has given you a package to consider. The package provides you with 12 months of your total remuneration including benefits. You consult an employment lawyer who advises you that under the circumstances the appropriate range of pay in lieu of notice is between 14 to 17 months of your remuneration. You instruct your lawyer to write a demand letter asking for 15 months of remuneration. In due course your former employer responds saying that they think their initial offer was satisfactory and it will not be increased. What are your options? And how do you decide what to do?

Firstly, your have several options. One is to simply accept what your are being given and move on with your life. The second option is to start an action against your former employer claiming for damages for wrongful dismissal in the amount you think you should get. The third option is to have your lawyer pick up the phone and attempt to negotiate the other side up to a higher position. There are reasons for choosing all three.

When would you decide to take a company’s initial offer? Whenever you think you can replace your income well within the notice period. Why? Because damages for wrongful dismissal are subject to mitigation. In other words, if you refuse to settle your case quickly and you end up one to two years later in a court room, the judge will decide upon the appropriate notice period in your case and award you your remuneration during that notice period. But, the Court will subtract from that award any income earned during the notice period through alternative employment or self-employment. Thus, by not settling quickly in the situation where you earn alternative income soon after your dismissal, you might do yourself out of extra money. So, if you honestly believe that you can replace your income quickly you should give serious consideration to taking what is being offered and moving on even if it is not quite what a Court would award you. Remember, a bird in the hand is worth two in the bush.

Obviously, when you think you are going to have difficulty finding alternative employment, you have nothing to lose by attempting to negotiate a higher severance package or if that fails, starting an action against your former employer. If you honestly believe that your former employer will not negotiate with your lawyer, there is no point in having him or her pick up the phone and attempt to settle. It’s worth one try, but that’s all. Continuing to go back several times to an employer who is not budging, makes one appear weak and afraid of litigation and most lawyers don’t like that. In these cases you might be better off just suing your former employer at the outset.

As always, please call me if you have any questions regarding your severance package, the reasons you were fired, or the manner in which your employment was terminated. The specifics of your case will dictate how to proceed.