Just hired? Now is the time to talk severance

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The high-tech downturn didn't just burst the dot-com bubble -- it also revealed a dark side of the New Economy. Technology workers across the country are complaining that employers who once pampered them with espresso machines are not only firing them unceremoniously, but also doing it without notice, severance pay, or, in some cases, back wages. The resulting losses are not purely financial. "Workers put in a lot of sweat equity, and now find they've got nothing," said San Francisco attorney Michael Loeb, an employment law specialist at McCutchen, Doyle, Brown, & Enersen. "There's a sense of mismanagement."

Unfortunately, even workers who are told to clear out without notice -- and without two weeks' extra pay in their pockets -- may not have a legal claim against their former employer.

The first hard lesson tech workers must learn is that employers have the upper hand at severance time. The real shock for most workers, according to Loeb, is that they have no legal right to severance pay or advance notice of termination. And if the company that fires you goes out of business, COBRA (Consolidated Omnibus Budget Reconciliation Act) regulations that guarantee access to health care coverage don't apply, he said.

Most tech workers are classified as "at will" employees, which essentially means they can get the ax for almost any reason, no matter how capricious, even if they've been model employees. The exceptions are terminations based on age, gender, or race. Additional protection may be afforded to members of a technology union -- a rarity in the high-tech world -- that has negotiated a protective bargaining agreement.

The WARN (Worker Adjustment and Retraining Notification) Act is available to those involved in a mass layoff, which is defined as 50 or more people being let go at a company with fewer than 100 employees. WARN guarantees at least 60 days' advance notice or the equivalent in severance pay.

Even if your company has a severance plan, not every termination is a clear-cut case. In late March, the New York Times reported that a group of Computer Associates workers, who were officially terminated because of "poor performance," had charged that they were let go because of the company's weakening financial condition -- essentially, a mass layoff that, according to the article, was disguised to circumvent severance payments. At the time of this writing, the disputes were unsettled.

The Times also reported that tech companies like Microsoft and Cisco Systems use an employee grading system -- ranking workers by percentile -- to help decide who goes and who stays. Although praised by some executives as a way of making sure vital employees survive the ax, the practice can be easily abused, legal experts warn. "If you are going to engage in job grading, you have to spell out your criteria clearly and apply it evenly," said David A. Larson, a law professor at the Hamline University School of Law in St. Paul, Minn. "If your grading is more subjective, there is a real possibility for conscious or unconscious discrimination. For example, you may not think women tech workers are as good as men, and you may be grading them lower."

One favorable trend for employees, according to Larson, is that some courts are ruling against especially arbitrary examples of at-will terminations. "In situations where there's a [company] letter or memo stating you won't be fired as long as your work is satisfactory or stocks don't fall below a certain level, there's an implied assurance, even when you don't have an employment contract," he said.

Regardless of your current employment situation, these disputes point to one clear fact: Most tech workers need to be more aggressive when negotiating for their next job. "The best time to plan for termination is when you begin your employment; the worst time is when you've been given a pink slip," said Neil Klingshirn, an employee law attorney at Fortney & Klingshirn in Akron, Ohio. Here are some tips:

  1. Negotiate an employment contract. Get the company to clearly state the length of employment and the severance package. Klingshirn admitted that most employers balk at such contracts, but urged employees to broach the subject, no matter how awkward it feels. An employment commitment releases you from the vagaries of at-will rules. He added that high-tech recruits often have the bargaining power to negotiate a severance package. Often, technology employers ask new employees to sign a nondisclosure agreement and a noncompete clause. "If an employer says no to a severance agreement, it's an opportunity for the employee to say, 'If I can't work in my industry of choice, pay me to sit on the sidelines,'" Klingshirn said.
  2. Know the laws of your state. Although federal statutes may not provide much help for at-will workers, each state passes additional laws to protect employee rights. For example, California requires employers to provide all wages due, including accrued vacation time, at the time of termination. For a rundown of individual state laws, see Cornell University's Legal Information Institute Webpage (www.law.cornell.edu/topics/Table_Labor.htm), which has links to each state.
  3. Diligently examine a prospective employer's financial health before you join its staff. For private companies, candidates may need to inquire directly during interviews. "Employees may be shy about asking for burn rates [of capital] and financial results," Loeb conceded. However, such information may be important when proving claims that a job applicant was misled about an employer's long-term prospects.
  4. Work the Web. A number of sites help advise employees of their rights. Some of the best include:
    • My Employment Lawyer (www.myemploymentlawyer.com)
    • Prairielaw.com (www.prairielaw.com)
    • The Employee Rights Counseling Center (www.nerinet.org)
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