Enforceable Severance Clauses

I have, I think, a simple question. -I recently left a job from a Fortune 500 company because of discrimination issues. They gave me a severance package, however they said they would pay until Jan. 22nd unless i got a new job. If the new job paid less then what i was making then they would only pay the difference until jan. 22nd. I should have negotiated this better, but I just wanted to get out:(

My question is….if I accept a new job before then 22nd, is there anyway they can find out like IRS, public info, ect? I feel that I should be owed that money regardless and still would want to accept my last check.

To answer your question, yes they technically could find out. They won’t and even if they did they wouldn’t pursue it because the amount of money would be so small it wouldn’t be worth their time and effort. At worst, you could expect the money you owed to your previous company to be turned over to a collection agency. This could affect your credit.

Now, to answer the question you are clearly avoiding. Should you try to cheat your former company? The answer is a big, resounding, no. No, no, no and no. Looking into my crystal ball I see that you signed a General Release in exchange for this severance. This clearly spelled out the terms of your agreement, including this clause about obtaining new employment.

Do not sign documents that you do not agree with. While I believe your company wouldn’t do anything about it, they might and you would lose and you’d have to pay back the money and face legal fees. Why would you want to put yourself into such a situation?

Personally, I think you previous company is foolish and makes things more difficult for themselves in the hopes of saving a few bucks. Dumb, dumb, and dumb. If a clause is going to cost the company more to enforce than it will save them, they need to stop and consider why they put it in there. My bet is some senior HR person has a bee in his little bonnet and wants it there. People who actually carry this stuff out think it’s foolish, but their power is limited.

Companies offer severance to people like you (who feel they were discriminated against), do so to get you to go away. Honest. It’s not out of sense of fairness (oh, you were wronged, so we must give you cash!), it’s out of sense of “this person is ticked and will sue. Even if we are sure we would win the lawsuit, the bad press and the cost are not worth it to us. Let’s give her a small amount of severance and she will go away.”

So, since that is the goal, it seems counter productive to include a clause that requires you to come back and report your new job. It seems especially counter productive to include a clause that discourages you from finding a new job. Happily employeed former employees=people who leave you alone.

So, in summary (I feel like I’m writing a bad Freshman English paper, although let the record state that I never took Freshman English because I passed the AP English exam), Yes, you are legally bound to report new employment to them. No, they probably won’t come after you. Yes, your previous company has foolish policies.

Good luck with the job hunt. I hope you find a fantatstic job. And I hope you filed for unemployment as well. If you didn’t, go back and do so now.

(One little off topic hint–if you are being terminated, make sure you don’t negotiate a “voluntary” termination reason. Sure, it sounds nice to be able to say you resigned, but it makes you (generally, your state may vary) ineligible for unemployment benefits. Also, if you are being fired for cause, try to negotiate a non-willful non-performance or position elimination termination reason instead. For cause=no unemployment.)

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6 thoughts on “Enforceable Severance Clauses

  1. From a person who has had to administer this ridiculous type of package before, yes, I also think it’s a pointless waste of time. When asked about this clause by the employee in question, I always told people it’s on the honour system, and we would appreciate a call if they do find work so they can fulfill the terms of the contract they agreed to and signed. You would be surprised at the number of people that did keep us informed…a conscience is a funny thing.

    Reading between the lines however, no, I was not calling the person daily to see if they were working. If they didn’t let me know, I probably would never know because I had no interest in launching a full-out investigation about whether the person was working or not. And no, we never pursued any legal action if we “heard” someone was working and didn’t tell us.

  2. “Happily employeed former employees=people who leave you alone.” This is 100% spot on!

    Evil, you need to write a book. Seriously.

  3. “My bet is some senior HR person has a bee in his little bonnet and wants it there”

    LOL! Oh my, all too true.

    I’ve got a different term for it, but I bet every HR person can go through their policy manual(s) and identify many bees in bonnets.

  4. In CA, you can sometimes negotiate unemployment even in a for-cause termination. We had an employee physically attack a supervisor, and he got unemployment. We’ve also had several terms for attendance issues that got it too.

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