“SEVERANCE” PACKAGE

Severance package is good, right?

Yesterday the CEO of Wachovia is asked to leave and we hear he is given a “severance package” of 1.45 million. I will bet you a portion of that 1.45, that Mr. CEO had a few terms defining his exit. No working at a large bank for 5 years…. No disclosing confidential information or trade secrets… no writing a book about his company’s failures.

In Contract law, in order for there to be a valid contract, both sides have to get something. It is called “consideration.” If you can prove that you don’t get anything, it is a pretty reasonable argument that the contract is invalid. So large companies can’t just fire you and then say – “Sign this non-compete that limits your right to work, and ever make money again.” They have to give you something in return, like a severance package.

We get calls frequently from folks that say – “they have told me if I don’t sign this non-compete, I won’t get my severance package. Can they do that?” To which we often reply – “yes they can. Unless it was previously agreed upon in a separate contract, they have no legal obligation to give you the money and you can chose to sign and take it, or walk. I know its not a great choice – but it is yours to make.

In this difficult economy – it is worth taking the time to review the “severance package” and the terms of it. Have an attorney check it out for you, consider the financial risks of taking it, or not – and then decide. Please don’t be rash and just sign – that’s when folks get into trouble… My guess is the CEO of Wachovia had a whole team of attorneys review his 30 page exit contract, you should too.

Lauren Ellerman

Lauren Ellerman

In 2011, Lauren Ellerman was named "Young Lawyer of the Year" by the Roanoke Bar Association for her work in the community. To speak with Lauren about your personal injury case, contact her at lellerman@frithlawfirm.com.