Priorities for Contracted Employees Negotiating Their Severance Agreement

When employers separate from employment relationships, they may consider negotiating a severance agreement and a contracted employee.  Contractors may have a specified term of employment and may not be offered a severance, but your employer may be willing to offer a termination package.  Negotiating a severance can be daunting, but these tips can help prepare for that situation.

What Does a Severance Package Include?

Severance packages can vary greatly from one employer to the next. Some post-employment benefits are required by applicable law, but asking for benefits above the legal minimum is worthwhile.  It is not uncommon for employers to offer a small amount of compensation, while others might offer a more generous sum and non-monetary benefits, such as career counseling. Your package might include:

  • Financial compensation: Severance packages may include some financial compensation based on your role, performance level, length of stay, and company policy.
  • Stock options: Contracted employees don’t typically have stock options in their employer’s company, but if you do, you’ll need to find out whether they vest right away upon the termination of your employment.
  • Continuation of benefits: Again, contracted workers usually don’t have the same benefits as full-time, regular employees. However, if your employer offered you benefits (such as health insurance), ask whether your benefits will continue after termination and for how long.
  • Non-monetary benefits: These benefits may not be as appealing as cash but can be invaluable regardless. You may be able to arrange a settlement agreement that includes career counseling or job placement assistance, for example.

Understanding the Fine Print

Settlement packages often include legal stipulations you’ll need to be aware of before accepting. Here are a few that you might find in your severance agreement:

  • Release of claims: A release of claims is a waiver that prohibits you from suing your employer for any issues that arise from your termination of employment.
  • Non-compete: A non-compete may prevent you from accepting a job with a competitor or employer in the same industry or geographical area. Non-compete clauses can limit your work opportunities, so if your severance agreement includes one, it’s wise to consult with an employment lawyer to discuss how it may impact your future plans.
  • Non-disclosure: Non-disclosures prohibit you from revealing company information and proprietary formulas to the competition.
  • Non-disparagement: This clause prohibits you from making negative statements about the employer that could hurt its reputation.

Negotiating for a Fair Severance Package

You may have negotiated your salary or benefits before signing with your employer.  You can put those same skills to work regarding severance.  Having a structure for this discussion is important, and these tips will help you frame your argument.

  • Define your goals: What do you hope to achieve through negotiations? Knowing how much compensation you would be happy with will help you stand firm if your employer lowballs you.
  • Know your value: Were you a high-performing employee? Your settlement package should reflect the value you brought to your employer. If possible, approach your employer with hard numbers, such as “I generated $1.2 million in revenue for the company in 2024.”
  • Be flexible: Come to the table knowing that you’re probably not going to end up with the exact amount you’re asking for. If your employer doesn’t want to offer you suitable financial compensation, try negotiating for other perks. For example, your employer might be willing to pay your health insurance premiums for three additional months.
  • Stay respectful: Severance negotiations can become heated, especially if you believe your employer isn’t offering you a good deal. No matter how frustrated you become, remain professional and respectful.
  • Talk to an employment attorney: It can be hard to know whether the severance package your employer offers is fair. Before agreeing to anything, it’s wise to consult an employment attorney. Your lawyer can go over the agreement and ensure you understand the financial and legal consequences of signing.

If you need advice, call Anderson Jones, PLLC

Does your severance agreement include confusing legal clauses that are giving you pause? Or perhaps your boss says they don’t offer severance to contractors, but you believe they’ve misclassified you as a contractor when you’re actually an employee. Anderson Jones, PLLC can help with matters like these.  Our attorneys are well versed in negotiating severance agreements and settlements. Before you sign anything, call our firm to ensure your offer is fair.

Contact Anderson Jones, PLLC at 919-277-2541 to request your consultation today.