The following are some insights from Phyllis Brust, the dual-career director at the University of Chicago until her layoff in 2016. She is now a consultant doing writing and career counseling with individual clients. I hope you can learn from her severance negotiation failure.
Given I wrote the actual book on how to negotiate a severance in 2012, How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye, I thought it would be interesting to share her key takeaways from her severance experience and then share my own.
Phyllis was 62 years old when she got laid off. She had 16 years of service, which made her a fantastic candidate for getting a fantastic severance. People with less than three years of service seldom ever get severance. Instead, they get mandatory WARN Act pay or a token two weeks of pay if they work for a smaller firm or a private firm.
Let's read some of Phyllis' takeaways from her severance.
A Severance Negotiation Gone Wrong
1) A Bad Offer
Phyllis was called into an office an was given a six-page letter marked “Via In-Person Delivery” that offered her a severance amount corresponding to nine weeks of employment, representing nine years of work, even though she had been at the university for 16 years. The offer also subsidized part of the expensive post-employment Cobra medical-insurance payments for three months.
To accept the severance, she had to release the institution from causes of action “from the beginning of time” and sign a confidentiality clause promising not to “disparage” the university.
The standard amount of severance is 1-3 weeks of pay per year worked. Therefore, Phyllis should have got 16 – 48 weeks worth of pay, not a lousy 9 weeks. She smartly decided to negotiate!
She writes, “Thanks to my years of counseling academics on their careers, I was savvy enough to know that I could negotiate in this situation. I was less than a year from being eligible for the university’s retiree medical plan, so I asked to be granted eligibility. I also asked for 16 months of severance to reflect my 16 years on the campus. Bert’s response was that there was no precedent to offer me a higher severance. (I later learned that wasn’t accurate.) He was terse. I found him to be aggressive and adversarial in our subsequent dealings.“
2) Her job was eliminated, but not her responsibilities.
Phyllis' job was given to someone 20 years younger than her. She wanted to sue for age discrimination. But she might lose, spend a lot of money, hurt her reputation, and get nothing in return. Therefore, she decided not to sue but to negotiate.
She realized she had nothing to lose by negotiating. Given every employee usually gets several days before having to sign the letter, I absolutely agree that every laid off employee should negotiate.
It's important to read your severance letter and note every deadline. Everything is important to track from when you will get your check to when your subsidized health coverage will run out.
In Phyllis' case, she had 45 days to sign the severance agreement, which is an extremely long time based on my experience consulting with dozens of people on how to negotiate their severance. The usual timeline is 1-4 weeks.
Under the law, if only one person over 40 had been laid off, she would have had just 21 days to decide whether or not to sign the agreement. But there were two people over 40 in her department who got laid off.
3) The importance of documenting everything.
When you lose your job, you lose everything: e-mail address, computer files, contact folder, etc. You must download and document everything. But you must also be careful NOT to download private work information.
I accidentally downloaded some private client files during my two-month severance window, and I got reprimanded by HR because they track everything. Luckily, they concluded I didn't do it on purpose and the client file was five years old and irrelevant. But during this time, I almost had a heart attack for almost losing a multiple six figure severance package due to one silly mistake!
4) Come to terms with reality.
You will become angry and confused about your layoff. You might find life unfair. But unfortunately, you were voted off the island for whatever reason, and you must come to terms with reality. You did good work, especially if you lasted a long time. But good things must come to an end.
Use your layoff and severance package to try and do something new and exciting. Something you've put off for way too long! Be Unapologetically Fierce About Pursuing Your Dreams
5) Get emotional support from ex-colleagues, friends and family.
Believe it or not, millions of people have been laid off before you. It's not a shameful or unusual thing. Find support in your loved ones and in others who may be going through your same situation.
6) Learn everything you can about your rights as an employee.
Read your institution’s policy manual on layoffs. Get everything you are entitled to. She downloaded the university’s own guidelines for laying off employees to hold it accountable as much as possible.
Believe it or not, most employees I know have not read their employee handbook. Do that ASAP during your time of notice and fight for your rights.
7) Consult with as many people as possible.
Talk with lawyers and other folks who’ve been laid off. In addition, talk with colleagues who may have insider knowledge. Chat with human resources. And strike up conversations with other managers who've had to lay people off.
Again, you have no downside to finding as much information as possible. You've already been earmarked for termination and there is almost no chance of keeping your job.
8) Plan a gracious exit as much as possible.
You want to leave as much as possible on your terms, not the employer's terms. It will make you feel better about your departure, less embarrassed, and provide you more closure.
In the goodbye note Phyllis wrote to her colleagues, she was determined to acknowledge her layoff directly and omit euphemisms like “awaiting the next challenge.”
“If you are given time and don’t need to leave immediately, try to enjoy those last days on the job. Have lunch with friends, take walks, visit the campus museum. Network and conduct informational interviews. Seek references. Got to happy hour! Again, what are they going to do? Fire you?”
There is no downside to enjoying your last days in the office!
9) Sign the severance papers after you've exhausted all avenues.
It is generally not a good idea to sue. Instead, try and ask for a better severance package. Employers want to take care of their ex-employees, especially ones with over 10 years worth of experience.
The last thing an employer wants is to get thrashed publicly in the media, like more and more disgruntled employees are doing now. Actually, the worst thing is if a disgruntled employee returns to shoot up the place. Let's pray that never happens.
Just know that employers are highly aware of the downsides of pissing off a disgruntled employee and will try to make things work.
The End Result Of The Severance Agreement
Here's what Phyllis did in the end:
She submitted a counteroffer to be paid more severance to cover financial hardships (including the cost of Cobra) and to be included in the retiree medical plan.
Given a severance is taxable, she requested a specific amount she hoped to receive after taxes. She also proposed what she called an “honesty clause” (allowing her to talk and write about her layoff and severance if what she said was true) — to replace the university’s confidentiality clause (which limited her to administrative or legal proceedings in talking about her case).
In response, the university granted her additional severance, but significantly less than she had requested. It declined to include her in the retire medical plan and nixed her honesty clause.
Asking for an “honesty clause” to replace the university's confidentiality clause was going too far. This was a severance negotiation failure and her biggest mistake.
It hinted that her intention was to write about her experience (which she ultimately did) and maybe even show some retribution for getting laid off after 16 years. A severance package is all about discretion.
A Severance Negotiation Failure
She had really thought the institution would be understanding and would grant all her requests. Because the university did not, she ended up NOT signing the severance agreement and GOT NOTHING!
Holy moly, I did not anticipate this to happen. I understand that Phyllis was a proud woman who fought for her rights. We always feel a little or a lot hurt by being told we're getting laid off. But something is better than nothing when you're getting laid off.
Given she said she was offered additional severance, I assume she got closer to 15 weeks versus her nine weeks initial offer. Based on an estimated $120,000 annual salary, a 15-week severance package equals $34,615 plus subsidized healthcare.
I'm sorry to say that walking away from $34,615+ is a bad move. Because here's the dirty secret. She could have still written an honest tell-all story about her severance process years later if she accepted her severance. So long as she's not outing specific people and bashing her ex-employer over the head with a baseball bat, the employer is likely not going to retaliate. That would bring them unwanted publicity.
She makes herself feel better by saying, “I’m a career counselor and can advise others and institutions, and I can write about my own experience at the university with no confidentiality clause to constrain me. I get a twinge every time I pay my bills, but I think I did the right thing for me.”
That's fine. But she can privately share her experience to as many people as she wants in her career counseling practice.
The Key To Getting A Great Severance
The key to getting a great severance is to put yourself in your employer's shoes well before you get laid off and during the severance negotiation grace period if you're too late.
The more you can understand what the employer wants, the more the employer will give you. Phyllis frightened her employers away by asking to talk publicly about her severance agreement.
Think about all the potential damage Phyllis could do during future downsizing situations. Maybe her public outing would cause employees to want to negotiate a severance and leave before the University wants. Or, maybe other employees who get let go will come after the University for not getting enough. Perhaps Phyllis would out people and shame them publicly.
I can go on and on about the tips for getting the best severance possible. But the best tip I can give you is to buy my book that I've spent over nine years writing, updating, and honing. The book was recently updated with new case studies, resources, and more.
Use the code “saveten” without the parentheses to save $10 immediately in my special promotion.
You will read case studies and learn what to do and what not to do. You will learn how to set up the meeting and approach pertinent people. Most of all, you will gain the confidence to fight for what you deserve.
Best of luck!
About the Author:
Sam worked in investment banking for 13 years. He received his undergraduate degree in Economics from The College of William & Mary and got his MBA from UC Berkeley. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $250,000 a year in passive income. He spends time playing tennis and taking care of his family.
Financial Samurai was started in 2009 and is one of the most trusted personal finance sites on the web with over 1.5 million pageviews a month.