Strangled by a Safety Net

When severance agreements demand workers’ silence

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The year 2019 has been an anxious one for the American worker. In March, a report from the outplacement firm Challenger, Gray & Christmas noted that corporate layoffs had hit their highest level for a first quarter since 2009—a 35.6 percent increase from 2018. As a result, 190,410 workers were left out in the cold between January and April, even as the fascist in the White House continued to tout low unemployment numbers and crow about “jobs, jobs, jobs.” Media giants like Gannett and Verizon and digital upstarts like BuzzFeed and Vice Media accounted for at least 1,650 of these lost jobs. (Full disclosure: I was laid off alongside 249 Vice coworkers in February 2019.) And the trend shows no sign of abating: digital and print media outlets have continued to shutter, while Ford announced in May they’d be reducing their global white-collar workforce by 10 percent, including 2,300 job cuts in the United States alone.

Almost 80 percent of American workers live paycheck to paycheck, which means that in the event of a layoff they have no savings to fall back on. Many will have to apply for unemployment compensation, which most states award to workers who have been in their job for a specified length of time (such as at least a year). The benefit is usually much less than the worker’s full paycheck was. The better option is to leave with severance pay—which the Department of Labor defines as a sum “granted to employees upon termination of employment” and is usually based on years of service. As the DOL makes clear, severance isn’t a right that’s enforceable by law outside of a union contract. And although there is one useful legal tool for workers without severance contracts, it only applies in certain cases. The WARN Act (Worker Adjustment and Retraining Notification) is a federal statute that requires companies with over a hundred employees to give workers at least sixty days’ notice prior to a plant closing or mass layoff, which is defined as affecting more than fifty jobs. Failure on management’s part to give appropriate notice entitles workers to sixty days’ worth of wages and benefits. But the WARN Act generally does not protect part-time employees, or those who have been with the company for under six months; in addition, the Labor Department notes that “regular federal, state, local, and federally-recognized Indian Tribal government entities that provide public services are not covered,” either.

For workers lucky enough to have the option, accepting a severance payout may preclude them from filing right away for unemployment benefits, depending on the state. In New York, for example, where the vast majority of 2019’s newly unemployed digital media workers are located, individuals who continue to receive the exact same benefits they did while working will be ineligible for unemployment (unless their weekly severance pay is less than the maximum weekly unemployment insurance benefit). For those whose severance is structured in the form of weekly or biweekly “paychecks,” that means they’re unable to apply for any extra help until the pot runs out. At that point, they will either need to find a new job post-haste or become intimately familiar with the ins and outs of their state unemployment agency before their next rent check is due. Not to mention costs like health care—while laid-off workers who qualify for COBRA can temporarily continue on their employer-sponsored health plans, the premiums are often prohibitively expensive, especially for those newly facing financial hardship.

It’s true that individuals are sometimes able to negotiate for a better deal, but ultimately, without a union contract, even the most beloved employee is still at the mercy of the overlord in the corner office once they’ve decided it’s time for heads to roll.

Flight of the Golden Parachute

When the topic of severance packages comes up in polite conversation, it’s usually not in response to a news story about a group of workers who have unexpectedly had their livelihoods yanked out from under them. It’s because some swinish CEO or another has vacated their position and been rewarded for years of corporate malfeasance with an enormous parting gift. These golden parachutes are par for the course among a certain echelon of C-suite executives, whether they’ve put in thirty years or, in cases like that of former Merrill Lynch CEO Peter Kraus, a mere three months. The sums conjured up for their departures are enough to make Rupert Murdoch’s wizened human flesh mask blush—or send a normal person running toward their nearest guillotine wholesaler.

When former General Electric CEO Jack Welch—who became known in the early 1980s for popularizing mass layoffs as a demonstration of “corporate competitiveness”— left the company back in 2001, he collected an eye-watering $417 million in severance. According to a recent discussion among workers on The Layoff forum, a regular, non-CEO GE worker’s severance deal can be comparatively paltry; with some luck, they will receive one week’s salary per year of service—and perhaps as high as three weeks’ per year, if they’re really lucky. According to Glassdoor, engineer salaries at GE range from $53,652—$127,281. That may be a comparatively sweet deal considering the sorry state of severance pay in this country, but even in the best-case scenario, those numbers fall just a little short of what ol’ Jack raked in.

More recently, when Yahoo! CEO Marissa Mayer decided to bail after the company was taken over by Verizon in 2017, she was handed a $23 million severance package—and over $236 million worth of stock. The following year, Verizon slashed 7 percent of its global workforce, doling out 10,400 severance packages worth up to sixty weeks’ salary and benefits for those who voluntarily quit. But the company was later sued by two former employees who accused it of misrepresenting the amount of severance they would receive. It’s safe to assume Mayer did not have this problem.

While individuals are sometimes able to negotiate a severance deal, but without a union contract even the most beloved employee is still at the mercy of the overlord in the corner office.

Even if you’re of the mind that all CEOs are bad people, it is a bit galling to see just how well some especially bad people have made out. In 2016, after the now-infamous Access Hollywood tape heard ’round the world—in which Donald Trump made vulgar sexual comments about assaulting women as then-host Billy Bush tittered in the background—Bush lost his plum Today Show gig and was shown the door to the tune of $9 million.

When Fox News begrudgingly forced out conservative talk show buffoon Bill O’Reilly in 2017 following yet another series of damning sexual harassment allegations, his $25 million severance payout must have softened the blow. O’Reilly’s buddy Roger Ailes, the monstrous former CEO and chairman of Fox News, also stepped down in disgrace in 2016 after Gretchen Carlson, a former Fox & Friends host, sued him for sexual harassment and other women came forward with more allegations. Poor Roger was left with only $40 million to take away the sting. (Ailes died in 2017.)

Such excesses have not all gone unchallenged by the rank-and-file. After an October 2018 New York Times report revealed that two Google executives, Andy Rubin and Amit Singhal, had been awarded a collective $105 million in severance despite leaving the company amid a storm of sexual harassment allegations, the backlash from workers was swift and powerful. Though not unionized, twenty thousand Google employees staged walkouts in multiple cities to protest the payouts and other unsatisfactory sexual misconduct policies; in response, Google agreed to end its forced arbitration policy, end pay and opportunity inequality, and share an internal report on sexual harassment incidents. The victory didn’t take any money out of the two scumbag executives’ groaning wallets, but it did make concrete changes to the toxic culture that had allowed them to operate with impunity. No good deed goes unpunished in the marketplace, however, and organizers of the walkout later alleged that they’d faced retaliation from the company for the protest. At least one of them ended up leaving Google as a result.

There’s no end to this rogue’s gallery, or to the supply of golden parachutes that corporate America will continue to magick up in order to comfort itself in times of embarrassment or title change, regardless of how widespread their crimes. Just look at the most extreme examples: not only did South Financial Group founder and CEO Mack Whittle face zero legal repercussions for his institution’s role in the 2008 financial crisis, for example, but when he made his suspiciously-timed exit, he was rewarded for his time at the helm with an $18 million severance package—while the bank itself snagged a cool $347 million from the U.S. government. Whittle was far from the only banker to stroll away from the crisis with a hefty check; Citigroup’s former chairman and CEO Charles Prince stepped down in 2007 with a $40 billion retirement package. That’s “billion” with a “b.”

Puppet Mastered

With all this in mind, it’s easy to forget that severance packages are generally seen as a positive thing for most workers, especially those operating in the thousandaire (or hundredaire) range, as opposed to cash-fattened corporate bloodsuckers. But even these standard-issue parachutes can come with some pretty gnarly strings attached. Between December 2018 and July 2019, Laurie Davidson, a business agent for Writers Guild of America East, negotiated severance agreements with eight digital media companies. Each one has had its unique challenges.

Surprise layoffs can be destabilizing, and companies may try to exploit that atmosphere with the severance agreements they offer, saddling them with aggressive clauses on non-disparagement, confidentiality, and in some contracts, non-compete restrictions. Even when the actual enforceability of an agreement is in question, it’s uncommonly stressful to unexpectedly lose your job and find yourself immediately faced with a wall of intimidating legalese that’s standing in the way of buying groceries or paying your electricity bill. “The longer it takes to battle out these issues, you may miss a paycheck,” Davidson explains. “You’ll get it eventually, but they hold you hostage because people need the money from the severance agreement, and that’s the company’s leverage.”

In addition, signing a severance agreement is essentially waiving your right to pursue legal action against a company for anything that happened during your tenure there—which is particularly concerning when you consider the number of investigations for sexual harassment and employee misconduct that have rocked several major media companies in the past several years, in addition to myriad other industries where bad behavior is less likely to make headlines. As Berenice Young’s recent book In a Days Work lays out in detail, more vulnerable workers like farmworkers, caregivers, maids, and janitors are disproportionately affected by harassment (and are also much less likely to get severance at all). “In general, you’re signing a complete release of any claims at all or any monies owed,” Davidson says, “so if you have potential contract violations, or you want to file complaints with different agencies against the company, you’re signing away a lot of your rights in the severance agreement. You’re basically releasing the company of all liability of anything with you and your employment there.”

When presented with a flimsy or downright insulting severance offer, or one that comes with a number of biting caveats, workers might be forced to make an impossible decision between their pride and their wallet. The promise of even a skimpy sum to cover the basics while you figure out your next move is extremely tempting, and the bare necessity of survival tends to have the final say, especially if you have debts to consider. Bosses know this, and they’re happy to exploit it as much as possible in order to protect their own bottom line—as well as a company’s interests and reputation.

For the health care, service sector, and nonprofit workers that union organizer Shane Burley represents, a severance agreement can sometimes amount to hush money. In industries where mass layoffs are less of a concern than individual firings, including a neutral references agreement—in which a company agrees to provide only basic information about a worker’s employment dates if contacted by a new employer—in a severance contract is hugely important. Depending on the circumstances surrounding their departure, that provision might be the difference between a worker’s ability to land a new job and continued unemployment.

“What I have worked on mostly were [agreements] not for layoffs, but as a way of challenging a discipline [action],” he explains. That is, an agreement for someone who has gotten in trouble at their workplace for any number of reasons. “So like, ‘we will give you four months’ salary and benefits if you sign this thing, and we won’t speak about each other.’ With end of work agreements, it ends up being a cost-benefit equation [for the worker]. How much is having your former employer not ruin your future worth to you? Because past mistakes can haunt you for a lifetime. Especially if you fucked up in a health care setting where the stakes are high.”

Aggressive non-disparagement clauses can pose a particular issue for journalists, especially those who report on business or media. In essence, signees are prohibited from making any public statements that could negatively affect the company letting them go. In two instances, Davidson has been able to carve out a provision to protect reporters who may be assigned to investigate the company that laid them off from breaking their severance agreements—whether or not the truths they uncover hurt the company’s bottom line. But restrictive agreements like this are nevertheless why so many I’ve-just-been-laid-off tweets sound canned, or resolutely focused on “moving forward!’ and “new opportunities!” rather than laying out workers’ true feelings about their now-former employer.

Both Burley and Davidson point toward non-compete agreements as particularly insidious in their hobbling of workers’ freedom to find new employment in the same industry as their former employer. Davidson recalls an instance in which she was negotiating severance for three laid-off workers from a company with whom she’d already worked out a standard agreement in several other cases. While looking over the severance contract, she noticed that they had slipped in an entirely new section that added a two-year non-compete clause—something that both violated the union contract and that the company had neglected to mention to her. Had Davidson not caught it, the workers she represented would have been subject to a draconian policy preventing them from working for what she described as “basically every digital media company!”

Though not unionized, twenty thousand Google employees staged walkouts in multiple cities to protest the payouts and other unsatisfactory sexual misconduct policies.

“[A non-compete clause] only hurts the employee,” Davidson explains. “I’m not sure how damaging it is to the employer; they’re the ones who are getting rid of you, you know? If they want you, they should keep you; they shouldn’t be keeping you from someone else. That’s ridiculous. You’re already signing other language that says you won’t share any trade secrets or proprietary information. I think there’s no justification for it.”

Ultimately, worker solidarity is the greatest tool available to those who find themselves needing to fight for better severance. “People need unions, they need contracts, they need to stay united, and mobilize,” Davidson says. “They need to push back on management, who are on this continuous march to take away workers’ rights and make agreements like this [one] standard, when it needs not to be; it’s over-reaching and anti-worker.” But dangling even a half-decent severance offer is an effective way for bosses to hobble any potential militant fire among the rank and file, while those who escape mass layoffs are often left miserable, anxious, and wracked with survivors’ guilt. The ghost of Joe Hill himself would struggle to whip up righteous fury in that kind of messy, traumatic situation. None of this, of course, is incidental.

A Hamline University study found that stress-related illnesses were 50 percent higher in the companies that had downsized their workforce compared with those companies that had not, and that reports of employee burnout were more than twice as high at companies that had downsized. As the authors wrote, “With the high number of individuals being laid off from their jobs and the relative unavailability of similar job openings, people are left without adequate income for extended periods of time, resorting to very different and frequently lower-paying jobs, resulting in higher levels of stress and more health symptoms.” Instability chips away at morale and diminishes workers’ political will, and while it’s technically illegal for bosses to undertake retaliatory layoffs against employees for unionizing, it nonetheless happens with some frequency. Just look at what happened at Portland, Oregon–based Little Big Burger, where bosses have become notorious for busting the fast food chain’s fledgling union and have landed in court for at least one retaliatory firing.

New Guilded Age

Management knows that a strong union contract is a mighty weapon when it comes to severance. Baking aggressive severance language into a contract creates a legal responsibility for a company to pay up, even when they fall outside of the WARN Act’s limited purview. I experienced both the difficulty and necessity of including such language firsthand during negotiations for Vice’s second editorial contract, for which I served on the organizing and bargaining committees. Seeing the instability endemic in our industry, our bargaining unit spent hours upon hours arguing with management over severance, going back and forth over minutiae, and digging in our heels when they tried to sell us short. At the last minute, we got them to agree to our final proposal: one that allowed for much better severance than the company had offered until then. When layoffs hit a month later, it became clear why they’d fought us so hard during negotiations. It added a sense of tragic irony to the affair.

“What we try and do as a union is to use our collective power and the resource of having staff who can go line by line through these agreements with you and discuss all the potential problems that might [affect] you as an individual depending on your circumstances,” Davidson says. “It’s essential to have legal review of these agreements and to make sure you don’t get lost in the legalese, that you really go section by section and understand the implications of each.”

Surprise layoffs can be destabilizing, and companies may try to exploit that atmosphere with severance agreements containing aggressive clauses on non-disparagement, confidentiality, or non-compete restrictions.

Sometimes, a union contract can even stave off mass layoffs by giving workers the chance to leave on their own terms. In 2018, forty-four Gizmodo Media Group staffers took buyouts and voluntarily left the company following months of negotiations between their editorial union, GMG, and the group’s then-parent company, Univision (in 2019, Univision sold GMG to a private equity firm). The buyouts included eighteen weeks of pay and health care coverage; they were accepted by twenty percent of the editorial union.

“As much as the entire situation sucked, it was also one of the best demonstrations of the power of collective action in the workplace that I’ve ever experienced,” says Hamilton Nolan, a senior writer at Splinter, longtime member of the GMG union, and councilperson for the Writers Guild of America East. “When we heard that layoffs would be coming down from Univision, we got ahead of it. We talked to everyone in our unit and organized and decided that we would be willing to walk out unless the company agreed to bargain over the layoffs with us. We also agreed that we would both try to reduce the number of people affected, and to get the involuntary layoffs changed to voluntary buyouts. In the end we did both.”

Without this kind of support and solidarity, nightmarish mass layoff scenarios would undoubtedly be even worse for the workers who are swept up in the red wave. But even without a union, some workers have successfully taken collective action for a better severance contract. Davidson points to the Toys R Us bankruptcy affair. When Toys R Us declared bankruptcy in late 2017, thirty-three thousand workers lost their jobs as a result of the company’s filing. They had been promised severance at the beginning of the bankruptcy process, but after nearly a year passed without any sign of those promised paychecks, they took their battle for unpaid severance to the courts.

Following a public outcry, Toys R Us’s two private equity owners, KKR and Bain Capital, set up a $20 million hardship fund for laid-off workers, while United for Respect, a retail worker advocacy group, came in to help organize. Led by thirty-year Toys R Us veteran Ann Marie Reinhart Smith, a group of laid-off workers filed a class-action lawsuit against the company, asking that their severance claims be processed with the same priority as administrative claims. They were ultimately awarded $2 million by U.S. Bankruptcy Court.

Following this win, United for Respect hasn’t been resting on its laurels. In 2018, the group launched its Rise Up Retail project alongside the Center for Popular Democracy and OUR (Organization United for Respect) Walmart. One of its first actions was to come to the aid of workers who lost their jobs when Sears filed for bankruptcy earlier this year. When hedge fund investor and former Sears CEO Eddie Lampert tried to avoid paying out the $43 million in severance he owed, United for Respect’s campaign caught the attention of Senator Elizabeth Warren and Rep. Alexandria Ocasio-Cortez, who condemned Lampert’s craven abdication of responsibility. Now, United for Respect has thrown its weight behind a new piece of legislation in the New Jersey state senate that would mandate companies throughout the state provide laid-off employees with at least one week of severance pay for every year of full employment.

If the bill passes, it would provide a blueprint for taking this fight to the federal level, where such a law would have a huge material impact on workers across the country. Mandatory severance is certainly worth agitating for alongside the right to a $15 minimum wage and to a union; combined, these three guarantees would be life-changing for millions. Right now, as flawed as it is, severance remains a privilege when it should be a right, one that is only afforded to workers at certain companies and in certain industries. If it were to become universal, the burden that would lift from so many working shoulders is hard to overstate. A layoff would still be difficult, but the breathing room afforded by a few weeks of severance checks can make all the difference between inconvenience and disaster.

“As long as we’re willing to stay strong, we can exercise that power, and turn involuntary layoffs into another negotiation in which we can win concessions,” Nolan says. “Ultimately, we are the labor. No work gets done without us. There is no business without us. There’s power in that.”

Kim Kelly is a freelance writer and labor organizer whose writing on labor, radical politics, and culture has appeared in the New York Times, the Washington Post, the Guardian, The New Republic, Teen Vogue, Pacific Standard, and many others. She is a proud member of and councilperson for the Writers Guild of America, East. 

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