If you refuse a severance package, you will not receive the financial compensation or benefits offered by your employer in exchange for signing a release of claims. Essentially, you decline the proposed terms for your departure.
Immediate Implications of Not Signing
When you refuse a severance package, two key things happen:
- You Forgo the Severance Benefits: This includes any lump-sum payments, extended health benefits, outplacement services, or other perks specifically tied to the severance agreement. These benefits are not automatically owed to you by law; they are an offer contingent upon your acceptance of the terms.
- No Release of Claims: The primary reason employers offer severance is to secure a release from any potential legal claims you might have against them (e.g., for wrongful termination, discrimination, or wage disputes). By not signing, you retain your right to pursue such claims if you believe you have a valid case.
What You Are Still Entitled To
Even if you refuse a severance package, your employer remains legally obligated to provide you with certain entitlements:
- Mandatory Final Paycheck: Your employer is legally obligated to pay you all the wages you are owed, including accrued vacation time, in accordance with applicable labor laws, such as those in California. This payment is typically due on your last day of employment or shortly thereafter, depending on state regulations.
- Unemployment Benefits: Refusing a severance package does not automatically disqualify you from receiving unemployment benefits. Your eligibility will be determined by your state's unemployment office based on criteria like the reason for your job loss (e.g., laid off vs. fired for misconduct) and your availability for work.
- COBRA and Other Benefits Continuation: You generally retain the right to elect COBRA (Consolidated Omnibus Budget Reconciliation Act) to continue your health insurance coverage, though you will be responsible for paying the full premium plus an administrative fee. Other vested benefits, such as your 401(k) funds or pension, remain yours.
Common Reasons for Refusing Severance
Employees might choose to refuse a severance offer for several strategic or personal reasons:
- Inadequate Compensation: The offered amount may not be sufficient to compensate for the job loss, potential future lost earnings, or the value of the claims you would be waiving.
- Desire to Negotiate: An initial refusal can be a tactic to open negotiations for a better severance package, including more pay, extended benefits, or removal of undesirable clauses.
- Pursuit of Legal Action: If you believe your termination was illegal (e.g., due to discrimination, retaliation, or a breach of contract), you might refuse the severance to preserve your right to file a lawsuit.
- Unfavorable Terms: The agreement might contain restrictive clauses that are unacceptable, such as overly broad non-compete agreements, non-disparagement clauses, or confidentiality requirements.
Deciding Whether to Refuse: A Comparison
Understanding the trade-offs is crucial when contemplating refusal.
| Aspect | Accepting Severance | Refusing Severance |
|---|---|---|
| Financial Payout | Provides immediate or continued income. | No additional payout beyond final wages/benefits. |
| Legal Claims | Generally waives rights to sue the employer. | Retains the right to pursue legal claims. |
| Negotiation Opportunity | Limited once accepted. | Opens door for negotiation or legal action. |
| Job Search Impact | May include outplacement services, positive reference. | No employer-provided job search support. |
| Finality of Separation | Often a clean break, with non-disparagement clauses. | Potential for ongoing legal disputes or no formal closure. |
Critical Steps Before Making Your Decision
Before refusing a severance package, it's highly recommended to take the following steps:
- Review the Agreement Carefully: Understand every clause, particularly those related to the release of claims, non-compete agreements, non-disparagement clauses, and confidentiality requirements. Pay attention to the deadline for acceptance.
- Consult with an Attorney: An employment lawyer can review the severance agreement, assess its fairness, identify any potential legal claims you might have, and advise you on the pros and cons of accepting or refusing the offer. They can also help you negotiate for better terms.
- Evaluate Your Personal Financial Situation: Consider your current financial stability, savings, and anticipated job search duration. Can you manage without the severance pay while seeking new employment or pursuing other avenues?
- Assess Your Legal Claim's Strength: If you are considering legal action, realistically evaluate the strength of your case, the potential costs, and the time commitment involved in a lawsuit.
