Understanding Michigan Severance Agreements

It is never an easy thing to lose one’s job. It is certainly a challenging prospect on an emotional level, but likely even more so from a practical standpoint. How long will it take to get a new job? Do you have enough savings to get by while you hunt for a new job? Will you be able to pay all your bills?

These questions can haunt anyone who has lost their job, but in many cases a severance package can make the transition a little easier to swallow. A severance package is pay and benefits given to an employee upon his or her termination, oftentimes as compensation for unused vacation or sick leave, or even in recognition of the individual having worked for the company for a significant amount of time. In many cases, these type of packages are regulated and promised through the execution of a severance agreement signed by both the employer and the employee. However, it is important to note that these agreements are not always as beneficial to the employee as they may seem. Additionally, severance does not include pay for actual time worked and wages already earned by the employee, which are always required by law to be paid to the employee after termination.

A severance agreement is a simple agreement dictating the terms of an employee’s separation and release from employment. Keep in mind, the laws in most states—including Michigan—allow an employer to fire an employee “at-will.” This means that an employer or employee may end the employment relationship at any time, for nearly any cause or no cause, without fault. Of course, this does not include discriminatory terminations in violation of federal or state protections, such as firing someone due to their race or gender.

Oftentimes, though not always, the terms of employment may be outlined in an employment contract. You should also keep in mind that an employment contract may modify the standard at-will assumptions and set forth specific terms regarding the conditions under which employee can be fired. Whether or not the employer offers a severance package is usually included in such an employment contract or detailed in the company’s policies and procedures.

For example, the employer may include a severance agreement as incentive to have the employee stay with the company for a significant period of time or in order to try to have them give reasonable notice to the company before voluntarily terminating their employment. The agreement may state that the receipt of a severance package—whether in the form of unpaid vacation time or some other compensation—is contingent upon one or both of the aforementioned conditions.

However, it is important to note that an employer may also seek to utilize a severance agreement or a severance package in order to bolster the company’s protection against a wrongful termination lawsuit. In most cases, a severance agreement will include terms that require the signatory employee to forego his or her rights to pursue any legal action against the employer.

Thus, by signing a severance agreement or accepting a severance package, you may be eliminating your chances of pursuing legal action against the employer for work-related injuries, wrongful termination, or even to collect unemployment benefits. However, if you do sign the severance agreement, there are certain rights that can never be waived, including the right to report discriminatory or unlawful conduct to a government agency.

In order to qualify for unemployment benefits in Michigan, an applicant must be legally considered “unemployed.” This may seem obvious, but a severance agreement complicates the term “unemployed” since you are still receiving work benefits from your former employer.

It is absolutely essential that you contact an attorney prior to signing or agreeing to any type of severance agreement. The rights you are giving up may be much more harmful than the short-term financial benefit you stand to gain from a severance package. Contact the law firm of Carla D. Aikens today to schedule a consultation and allow our skilled attorneys to review and analyze your unique severance or termination circumstances.

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Written by Carla D. Aikens

Carla D. Aikens

After years of working for large law firms on major corporate cases, Carla D. Aikens chose to go out on her own and found her own firm because she is passionate about helping people of whom others have taken advantage.