How Long Does it Take to Recover from a Reduction in Force?

Posted by marykeating on August 4, 2009 under Employment at will | Be the First to Comment

According to an article in today’s New York Times, the difficulty of bouncing back from a layoff turns out to be permanent for many workers.   The article quotes an economist whose longitudinal study of workers laid off in an earlier recession, in and around 1982, proves statistically what many feel: in many cases, the middle-aged, middle income worker loses a job, and never regains his original wage level.  The study concludes that people who stayed in one job the longest were hardest hit, perhaps because they had become such specialists.  Not only that, those who had been laid off once were more likely to face the same fate in the next economic downturn, since their tenure was shorter.

I do not have the economic chops nor remember enough about statistics to evaluate the methodology, though it certainly seems to have been thoroughly considered.  The authors primarily focus on men’s experiences, but decide that women’s experiences track the same way.

The authors of this study do not take on the challenge of suggestions for an individual to escape the 20% long-term earnings reduction that befell the average laid off worker.  From a societal perspective, however, they note the following:

In particular, while the ability to fire ‘at will’ may benefit adjustment in
the labor market as a whole, the costs in terms of lost productivity and earnings of individual
workers may be much higher than typical replacement rates of unemployment insurance or
other programs designed to smooth temporary earnings fluctuations.
(See page 20 of the study).

I haven’t been hearing a groundswell of support for enacting a termination with cause standard, and don’t expect it to begin in Maryland.  So, in the meantime, employees need to keep in mind that loyalty to an employer is largely a one-way street.  Recommendations on avoiding a permanent reduction in a standard of living after a layoff include things that your mother told you, and things your geeky nephew can tell you.  Mom would say live below your means, you never know how long the good times will last.  And Stan the high- tech man can teach you to leverage social networking like LinkedIn (here is my profile) and other sites, and to keep track electronically of your friends and acquaintances, so you can get a great job search going when you need to.

Severance agreements

Posted by marykeating on July 24, 2009 under Employment benefit issues, Severance agreements | Be the First to Comment

Have you been offered a severance agreement?  Well, congratulations for getting something out of a bad situation, and condolences on the bad situation.  What does it all mean?

Severance is offered by some companies as a matter of policy; in many of those cases the severance policy is made according to a written plan with specific rules.  That means that the severance plan requires that you be paid based on some formula spelled out in the plan, perhaps a week for every year of service plus accrued but unused vacation.  Most of the plans I’ve seen also say the severance will be paid only if you sign an agreement in which you release all claims, agree to keep the agreement’s contents confidential, and agree not to bad-mouth the company.

These kinds of agreements are almost always a condition of the severance offered on an ad hoc basis to someone whose employment has been terminated.  Other frequently seen provisions include renewals of the non-disclosure agreements, provision of career placement services, and the ending of all fringe benefits, except, sometimes, health insurance.

To obtain an effective release from some claims of discrimination, the severance agreement must have certain provisions.  For example, to release age discrimination claims, an employee must be given a certain time period to consider the agreement, plus a seven-day period to revoke his or her agreement, under the Older Workers Benefits Protection Act.
To release Family and Medical Leave Act claims, the Department of Labor needs to be involved.

The EEOC offers a severance agreement primer at its website, you can find it here.

What’s your next step?

If you are presented with a severance agreement, you need to determine whether the value of what the company is offering is more than the value of your released claims.  In addition, if the agreement is not being offered as a part of an employment benefit plan, then there may be room to negotiate a better package, whether “better” means a higher financial payout, or an offer of something less tangible, such as a positive recommendation.  Experienced counsel may be of help in figuring out your options.