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10 Things to Know if You’ve Been Pink-slipped

The layoff experience is nothing short of a nightmare, and it goes so quickly,

employees rarely have time to consider their rights.

When the economy slides into a recession, layoffs are inevitable. Whether it's three or
four people laid off, a massive downsizing or a company that has been forced to shut its
doors, the layoff experience is nothing short of a nightmare for most workers.

Years and even decades of valued work, input and influence on a company comes to a
screeching halt in a surprisingly formal and succinct process. Rarely are the pink-slipped
given time to download personal documents from their computers or say goodbye to
peers. If severance is involved, there will be papers to sign. HR might want an exit

And that's all there is. The process happens so quickly, most are too stunned and shaken
to consider what rights or entitlements they do or do not have.

1. Go to HR First

If you're wondering why on earth you'd spend your first five minutes of unemployment
with the people who delivered the message, you are not alone. But experts say this is the
best place to start.

"The first thing someone who has been laid off should do is get to their HR department,
instead of running in five other directions. They are a resource whose job is to help their
employees," said Brian Hoffman, a partner in the IT division of Winter, Wyman, a
recruiting firm.

As every company handles layoffs differently, the HR department can let you know what
the company is offering, from severance to paying out unused sick time. But there is
another reason that an employee should talk first to HR.

"You're entitled to some kind of reference from the employer, saying that you worked
there, that you were a good employee and that you were laid off and not fired," said
Hoffman, something that will be no small distinction to make down the road.

2. Your Rights from Written Agreements

As a laid-off employee, you have three major categories of rights that you might be
entitled to. The more you know about them, the better protected you will be.

The first source of rights is employment agreements, which can include an individual
contract that extends for a period of time or a collective bargaining agreement--that from
a union or union-like entity.
"Look at the original terms under which you are hired," said Jay Warren, an attorney with
Bryan Cave LLP with a specialty in labor and employment law.

"An individual contract for a period of time will include provisions of what will happen if
you are terminated before the end of it. Check this first."

3. What Company Policies Entitle You To

The second source of laid-off employee rights is through company policies. ERISA (The
Employee Retirement Income Security Act of 1974) is a federal law that sets minimum
standards for most voluntarily established pension and health plans in private industry to
provide protection for individuals in these plans.

"ERISA means you are entitled to certain things. If the company policy involves a lot of
administrative discretion or complexity and could be ongoing, ERISA steps in," Warren

4. Your Statutory Rights

The third source is statutory rights, including the Federal WARN (Worker Adjustment
Retraining Notification) Act, which requires employers with more than 100 employees to
provide at least 60 days advanced written notice of a plant closing, or a layoff affecting
more than 50 employees at a single site. There are several other stipulations within the
WARN Act, but all serve to help workers get back on their feet.

"If Bear Stearns had just gone out of business last Monday--if the liquidity crisis was
generally unforeseen--60 days notice would have been required," said Warren.

Other statutory rights come from anti-discrimination and anti-retaliation laws.

"You can't be laid off, for example, as retaliation for taking family or medical leave,"
explained Warren.

5. What You Are and Are Not Owed

Laid off workers are owed payment for every minute of work they have completed up
until the moment they were handed the pink slip. Companies are also required to pay out
any unused accrued vacation time.

However, sick time is not refunded, as it is not a cumulative benefit.

"Sick leave is not a statutory requirement, unless you're part of a union, quasi-union or
bargaining arrangement that may have arranged it into your employment contract," said
Because sick time's purpose is only to keep a paycheck coming in the event of an illness,
companies won't pay it out if this is not the case.

6. How Severance Does and Does Not Work

Severance packages, usually a combination of salary, a lump sum of cash, stock options
or other benefits, are used to provide for an employee for a period after they leave the
employer or as a thank you for service.

It is typically scaled according to the number of years an employee had with their
company, as well as their position.

But workers don't have an inherent right to them. There is simply no legal requirement
for severance pay. It is more of a bargaining tool; an employee may be able to negotiate
for higher severance by agreeing not to hold the company responsible for wrong-doing.

7. What Signing a Release Means

If severance is offered, it is nearly guaranteed to be accompanied with a package of

papers that need to be signed, clearing the employer of any wrong-doing. Once this is
signed, an employee will have a nearly impossible time trying to sue their employer for
wrongfully terminating them, so it is best to consider this before signing.

Older workers will have an easier time, as a law entitles them to extra protection.

According to the federal Older Workers Benefit Protection Act, an employer must give
workers 40 or older at least 21 days to review their severance package. These workers are
allowed to consult a lawyer to review the contract before signing it, and they have can
change their minds within seven days after signing it and revoke acceptance.

8. What Benefits You're Entitled To

Unless an employee is terminated for misconduct or poor performance or their position is

eliminated, they are able to receive unemployment benefits. But there are other ways to
receive it as well, which is why consulting an employment lawyer may help.

"If you're offered another job within the company at a substantially lower level of
compensation and you don’t want to take it, you are still eligible for unemployment," said

Terminated employees have a right to COBRA (Consolidated Omniubus Budget

Reconciliation Act) benefits as well, a federal law which allows an individual and their
dependents to continue group health and dental coverage even if terminated.
The coverage will generally be with the same carrier at the same level that they had
before, at the same price that their company paid, but they have to pay for it themselves.
They also cannot let it lapse.

"If you have COBRA and think you're going to need it, you need to exercise those
options immediately," said Hoffman.

9. Why Employers Want to Minimize Your Trouble

So why are your employers being so nice to you as they send you packing? The reasoning
lies deeper than various federal statutes that keep them from doing otherwise. It is just as
likely that they're trying to save their reputation and legal position.

"If they get pennywise or foolish and don't handle this well, they've bought themselves
long-standing employee relations blemishes on their reputations. Years later, I hear
candidates saying that they don't want to work for a certain company because they
remember what they did to their employees," said Hoffman.

The same goes for the departing worker. They may be asked to take part in an exit
interview, but there is no law requiring them to do so. But experts will advise them to be
courteous just the same--when the employer gets back on their feet down the road, they
might be glad they didn't burn that bridge.

10. What the Recession Will Mean for the Laid-Off

As the U.S. economy continues to edge into a recession, it is unfortunately likely that the
pink-slipped population will increase. Even worse, what is offered to employees as they
are shown the door might slip as well--such as severance negotiations.

"It depends on the company. If it is in relatively strong economic shape and they're just
adjusting their expenses to avoid problems in the future, they're likely to continue with
their normal severance packages. But if the company is in the middle of a financial crisis
and doing everything it can to survive and avoid bankruptcy, it may reduce its historic
severance benefits. Legally, it can do this, or not pay severance at all," said Warren.

But these companies put themselves at a much greater risk for lawsuits, and open
themselves up to even higher legal fees. It is for this reason that even if significantly
diminished during a recession, almost all companies will offer some token.