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Exit Interviews, Termination, Firing, Lay-off, Downsizing, RIF - Benefits, Severance, COBRA

Employees faced with termination, lay-off, firing, downsizing or reduction in force (RIF) frequently have to complete an uncomfortable exit interview. The employer or HR representative charged with meeting with the terminating employee is sometimes as nervous and uncomfortable as the departing employee. Many HR representatives and employers find the termination process uncomfortable and prefer not to terminate long-term employees except when economic conditions dictate that result.

Even so, it is important that emotions be set aside during the exit interview to achieve an amicable separation that makes economic sense for both sides. The objective should be to engage in a give-and-take during the discussions to place both sides in the optimal financial situation.

For the terminating employee, the goals are likely to maximize the amount of money obtained as part of the severance, obtain all of the benefits that she/is entitled to, ensure that his or her subsequent job search is not hampered by having been terminated and obtain unemployment compensation without difficulty. In return, the employer may seek an assurance that no complaint or lawsuit would be brought by the employee, a smooth transition of responsibilities and continued cooperation, an agreement not to disparage the employer to customers, clients and the remaining employees, and agreement to return all files and provide all important passwords.

The following topics are typically discussed in exit interviews.

Severance Pay

Both parties should explore whether the employer will offer some severance pay. In exchange, the employee typically agrees to give up any right to sue the employer in the future. While employers are not required to offer severance pay, some employers offer them to reward long-term employees and soften the financial blow that a terminated employee will suffer while protecting the company from future liability. Employers may also obtain agreement from the employee to maintain trade secrets even after termination.

Vacation Pay

The terminating employee should review the accumulated and earned vacation and discuss same with the employer to ensure that his/her records match those of the employer’s so that an understanding is clear on how much vacation pay the departing employee should expect.

Accrued Vacation or Other Employment Benefits (401K, profit-sharing, etc.)

The departing employee should discuss the employer’s policies regarding retirement, health insurance, 401K policies and any rollover options as well as how such accounts are transitioned to other institutions or directly to the employee. All account numbers and holding institutions should be confirmed so that the departing employee is able to manage the accounts properly thereafter.

Status of Any Non-compete Agreements or Restrictive Covenants

A departing employee may request to be released from non-compete agreements or restrictive covenants in order to be able to obtain a new job. Subsequent employers are likely to be reluctant to hire employees with restrictions especially during recessionary periods when employees without restrictions may be readily available. A complete release from non-competes or restrictive covenants will help a terminated employee’s job search. If appropriate, a limited or narrow release may be appropriate to ensure that the employer’s most important clauses remain intact.

Continuation of Health Benefits (Cobra)

Both parties should also discuss the continuation of benefits, how long such will last, the due dates of any payments by the terminated employee for health insurance, where and how payments are to be made. The employer should also document that the employee has been offered the option, the associated costs and the employee’s decision whether or not to accept the continuation of benefits.

Return of Company Equipment and Other Property

A complete inventory of company property and equipment in the employee’s possession should be completed. It is also important to reach an understanding as to when and how the property and equipment would be returned and who bears the cost of returning them to the employer. The employee should also ensure that it receives the necessary permission to enter and retrieve all of his/her personal belongings on the employer’s premises.

Reference Letters/Communication with Prospective Employers

Given that the terminated employee is likely to seek new employment immediately, the parties should discuss and document the method for handling calls from prospective employers and references. A record of termination sometimes hurts a subsequent job search, especially if the reason for termination given by the employee is different from the one given by the terminating employer. To assist the employee’s subsequent job search, both parties should attempt to reach an understanding of what should be said to prospective employers. To avoid difficulties and possible lawsuits, most employers now only offer a neutral reference, stating only the dates of employment and positions held.

Eligibility for Unemployment Compensation Benefits

The terminated employee may intends to apply for unemployment benefits. If so, as part of the negotiations, the parties can address whether it is appropriate for the employer not to contest the application.

Job Placement/Job Search Assistance

Some companies provide job placement assistance by proving a recruiter or placement agency at no cost to assist the departing employee in a subsequent job search. Most parties prefer to use an independent and unrelated placement agency in order to ensure that the process is objective, confidential, and not tainted by the possibly soured relationship that led to the termination in the first place. If this becomes part of the agreement, the duration and any cost limitations should be spelled out.

Re-application, Re-employment, Recall or Rehire of Terminated Employee

Different companies have different policies about reemploying terminated employees and employees that resigned voluntarily. Clarifying this issue will likely eliminate future misunderstandings, confusion and possible retaliation lawsuits. An employer should explain to the departing employee whether or not he/she is eligible for re-hire especially in RIF situations or downsizings where economic conditions may sufficiently improve and result in a recall of employees.

Claims That May be Waived By Employee In Exchange for Severance

Most employers require that employees who are given severance pay agree not to sue the employer thereafter. In fact, most companies that offer severance do so to gain the certainty that no lawsuit will follow the termination whether or not the employee has any grounds for a lawsuit. The employer and employee should be careful to comprehensive list of the type of claims and lawsuits that the employee is giving up as part of the agreement. A detailed and comprehensive list avoids confusion, misunderstandings and ensures that the employer and employee fully understand the agreement.

Non-disparagement

For the employee, this helps with job search because the terminating employer will not make unfavorable comments to prospective employers. For the employer, the departing employee will make no disparaging comments to other workers, clients and/or customers.

Dates Payments Will be Received Employee And Company Property Returned

At the conclusion of the meeting, both the employer and employee should have an understanding of the date that the employee should expect the final paycheck and vacation pay. Agreement should also be reached on the date that company property in the employee’s possession should be returned to the employer and the deadline for the employee to remove his/personal belongings from the employer’s premises. If the employee seeks COBRA benefits, the dates that the employee should send payments to the employer.

Possible Continued Employment

In situations where the employer and employee have a good working relationship, it is often possible for the employer and employee to agree on continued employment under different terms, position or salary. If appropriate, the employer and employee should honestly evaluate the possibility of a pay-cut, demotion, transfer as an alternative. Many employers are reluctant to offer this alternative for fear that the employee would suffer decreased performance, reduced motivation, negativity and poor attitude in a lower position. It is thus important for the employee to assure the employer that morale, work performance, attitude and disposition would suffer no ill effect if the employee accepts a lower position. An employer also needs to be assured that the employee would not seek other employment as a result or become a negative influence in the office.