When Buyouts Go Bust
By: Sid Kirchheimer Source: Date Posted:
The first step taken by many companies facing mass layoffs is to offer buyout or early-retirement packages—usually to older, longtime workers, who tend to earn higher salaries.
On one hand, these arrangements commonly offer a better separation package than do general layoffs. The formula for calculating severance pay may be more generous. Pensions or stock options may vest at a faster rate. And the lure of extended medical benefits may be dangled under your nose.
On the other hand, warns employment attorney Steven Mitchell Sack, author of two books on the rights of employees facing termination, “Some early-retirement offers and buyouts promise lifetime medical benefits for employees who volunteer to be laid off. But the company may renege on that promise a few years later, or change its policies.” And, says AARP attorney Mike Schuster, “The courts have generally held that in the absence of a written agreement, the company can do that.”
Another potential problem with lifetime medical benefits comes if the company you worked for is sold after you leave it: The new owners may be held not liable to honor promises made by the previous owners.
Your protection: If you believe you’ll be laid off whether you take that buyout offer or not, consider accepting it. “Have an experienced employment lawyer draw up the agreement,” urges Sack, “including a written caveat that you’ll receive guaranteed benefits in the event the company is sold or there’s a policy change later on. By not doing that, many people get screwed down the road.”
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