Here's why negotiating your own severance package is a terrible idea

By Howard Levitt And Puneet Tiwari

Employees who want to take a crack at negotiating before calling in a lawyer can do much more harm than good

Most people know too little about the law to be useful and just enough to get themselves in trouble.

This old adage holds true for both employers and employees.

Our firm is often consulted by newly terminated employees to review their severance packages and become involved in negotiations. However, we are often faced with the question, “Can I just try to negotiate myself and, if it doesn’t work, out you can take over?”

The right answer is invariably “no”. This is not the time to try and save a little money as it will invariably cost the employee considerably more.

When employees attempt to negotiate their own settlements following termination, they risk putting themselves in a much worse position than where they began, making it more difficult for their lawyer later. The same applies, sometimes even more so, when they tell the employer that they have consulted a lawyer, who they will use if necessary, believing that that will motivate their employer to offer more. Here are some scenarios:

The most common problem, when employees attempt to negotiate severance on their own — even if they say they have a lawyer ready to act — is that the employer assumes that the employee does not wish to spend money on a lawyer or the lawyer would otherwise already be acting, and the employer therefore has no genuine risk that the employee will ever commence litigation.

Based on that view, the employer, will offer a relatively modest amount, but take the position that whatever they offer is their “final position.” But once stipulating that their offer is a final one, it becomes much more difficult for the lawyer to move them off of it, than if the lawyer had handled the negotiations from the outset, and the employer, facing the prospect of being sued, offered more initially.

Constructive dismissal

This area of employment law is especially nuanced — so much so that even many ostensibly employment lawyers strain when navigating their clients through it. However, when an employee tries to negotiate out of a constructive dismissal themselves, they usually corner themselves into a worse legal position. They may unknowingly condone the fundamental change in their employment destroying the prospect of a legal remedy; they may make a statement showing they have failed to mitigate their damages; or perhaps even resign precipitously and prematurely without first appreciating the legal consequences.

Retaining legal counsel after the fact could mean increased costs for necessary damage control, not to mention that the employee’s correspondence with the employer can be later used against them.

That is, if it is not too late to salvage the case altogether.

Full remuneration

Upon termination, employers often use only base salary in terms of reasonable notice. You may be offered six months at termination but on base salary only. You may be able to negotiate that amount up, but employees attempting to negotiate often forget to include their full compensation: bonus, commissions at on-target earnings, deferred compensation, benefits — these are often missed or disregarded. And employees may not understand that the contracts excluding those entitlements may be unenforceable. It can be difficult for employment lawyers to backtrack and have these items included after the fact or after the employer believes the employee will make the agreement without them.

‘For cause’ terminations

When employees are terminated for cause, even though there may not be sufficient “bad behaviour” to justify it, there is usually some conduct that they are embarrassed by. Employers often taken advantage of that and offer a paltry sum in exchange for a “without cause” coding on the employee’s Record of Employment. Often, employees will accept that offer out of fear of “cause” appearing on thier record. The reality is that the ROE “record“ does not matter outside of entitlement to employment insurance and cannot be seen by anyone. This is where a lawyer, who appreciates that this advantage is illusory, needs to jump in right away, sometimes skipping a demand letter and immediately issuing a statement of claim.

Employers too can be remiss when navigating forthcoming terminations without proper advice. The worst common mistake is the line of thinking that: “We have cause, but let’s be compassionate and issue a without cause termination.”

This approach handcuffs the employer from later relying on the bad behaviour if the matter is litigated and gives the employee’s counsel free rein to claim wrongful dismissal damages.

‘Let’s just call the employee’

If there is an issue with a disgruntled employee such as a health-related matter, a disability, request for leave, or other protected grounds, it is never a good idea to call the employee without a plan in place. The call will likely be recorded by the employee and later used to increase damages and embarrass the employer. Employers should seek advice from counsel and have a plan for that phone call with a list of points to cover and comments they should refrain from making. It would be difficult for any lawyer to explain away comments, when human rights damages are sought, such as, “Shirley worked when she was under the weather” or “you should consider resigning.”

No rational person would attempt surgery on themselves and then ask a surgeon to correct it. Everyone knows that they are not a surgeon. But many believe they understand at least the general principles of employment law. But that little knowledge can indeed be dangerous.