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Tuesday, January 27, 2009

General Release Woes

I was recently laid off with 60% of my department. I got 3 months of severance pay by signing a General Release that basically said I won’t sue the company for any reason, and I can’t work there for 6 months. I’ve tried to find out why this “6-month rule” is part of the General Release. Two hiring managers want to hire me back, but are hitting the 6-month rule roadblock.

Before I signed my General Release, I was chosen as the top candidate for a position in another department, but there was a sudden hiring freeze in that department just before the hiring manager could offer me a position. The position may open back up (at about 3 months into my 6 months), and I probably can’t be hired now, because of this dumb 6-month rule. Not only does this hurt me, the manager can’t get the employee he wants, and has to go farther down his list of applicants and/or re-open the time-consuming interview process.

A second position opened up (due to someone leaving that job for another job) that was absolutely perfect for me, in my old re-organized department. I was an excellent match for skills, and I had great connections within the group. I actually found out that the hiring manager had already inquired about hiring me, but he was told by HR that I can’t be hired because of the 6-month rule. Instead of filling his position ASAP, he now has to spend time interviewing lots of people.

This is very frustrating. I’ve talked to several HR people who are uniformly adamant that the 6-month rule cannot be waived (yet I know exceptions ARE made), and nobody in HR can explain the purpose of the 6 month rule. The 6-month rule can’t be about “double dipping” because there’s already a clause in the General Release that anyone re-hired before the severance pay runs out has to give money back (e.g. if you had 9 months of severance pay and were rehired at 6 months, you give back 3 months pay).

If I could figure this out, it might aid me in circumventing what appears to be a dumb, arbitrary and harmful rule.

I would love, love, love to help you figure this rule out, but alas, I cannot. It's not because it's a secret HR rule, it's because I think it's about as stupid as they come.

Now, I can give you some insight into a few other things. When you layoff someone you want to make a couple of things clear. First, that they aren't entitled to the next vacant position that matches their skills. Two, that they can't come back as a contractor in a similar role. Three, no double dipping.

My guess is that the six month prohibition against returning is related to the first point. Companies don't want to get involved in a "failure to hire" lawsuit. These lawsuits are where the candidate argues that the only reason he/she wasn't hired was an illegal one--race, gender, age, pregnancy status, etc. These are hard to prove (normally numerous candidates), but still expensive for the company.

My lawyer friends can chime in, but I actually think prohibiting someone from coming back for 6 months actually increases your chance of a failure to hire lawsuit. Why? Because you imply that they are eligible for rehire after that 6 month time period expires. I prefer to see a clause that states that your relationship with the company is severed and that the company has no obligation to rehire you at all.

Now, this statement doesn't mean that the company can't rehire you, it just means that when you sign the release you acknowledge that they are under no obligation to rehire you. And furthermore, that you will not be treated differently than other candidates.

When you put time frame prohibitions in your releases you are asking for problems, in my opinion. The goal of a reduction in force should be related to making the business more effective. Not just cutting heads. (Lots of companies have bloat and sometimes a mass layoff can help with that--proceed with caution though. Lots of potential problems, but that's a topic for another post.) If you are just obsessed with getting your headcount down, you are doing it wrong.

Managers should be able to hire the best candidate. This is what is best for the company. Remember the company? The company that was supposed to be more effective after a reduction? Yeah, that. So, stop prohibitions against hiring any particular person and just train your managers on how to hire.

If someone else could explain to me why 6 month or a 1 year prohibitions exist in releases, I'd be happy to know. And yes, I know that some releases prohibit employees from ever applying again. I know why this is: We don't want you back. (Companies that do this to everyone are just plain dumb, by the way. These clauses should be added to your low performers or problem causers, not everyone.)

The second prohibition I listed above was to prevent you from coming back in a contractor role. While this may seem as silly as the 6 month delay, there are actually legal reasons behind it. If you come back as a contractor 3 months after I lay you off, you can argue that you really are an employee and your job never was eliminated because, look! you're still doing this. Employees have rights under federal and state laws that contractors do not. For instance, if you successfully argue in court that you are an employee not a contractor then I have to give you the same benefits all my employees get.

The third, which your contract has, is a prohibition against double dipping. This also makes sense. We should not be paying you severance while we are paying you a salary. Repayment clauses are fine, in my book.

I realize this didn't solve your problem at all, but it was fun for me to muse on and I really do want someone to explain the logic. (Of course, I left out the most likely answer--someone high up wants it in there, so there it is and HR thinks it's stupid, but we're stuck with it.)


HR Godess said...

The 6 month rule doesn't make any sense and now the company has trapped themselves. HR is right to adhere to the clause - if it's there (whether it should be or not) it has to be followed. Not following part of a legal or binding document nullifies the whole document and can get them in real hot water. It probably shouldn't be there at all but it is. I would suggest looking for other employment and use some of these managers that want you back as references. It sounds like you're well liked and are in demand so use that to your advantage. It certainly couldn't hurt in this economy.

Jon Hyman said...

Speaking with my lawyer hat on, I agree that the 6 month rule doesn't make any sense. It's arbitrary and doesn't further any of the 3 principles you correctly identify. However, I also think it would have very little impact on a failure to hire lawsuit, depending on how it was written. I hope that it was drafted with appropriate, clear language stating that the 6 month period does not create any promise or expectation of rehire after its expiration, the employee has no reasonable expectation of future employment, and if s/he does reapply, s/he will be considered along with all of the other candidates, etc. Without that language, I agree that it does give an employee some wiggle room in a failure to hire lawsuit, but as long as the company is hiring the most qualified for the future open positions, it should largely be protected.

Anonymous said...

It sounds like the rule that you can't move into another position until you've been in your current position for 12 months. It has its place for some people, but works against others. However, HR can't (or at least, shouldn't) arbitrarily enforce rules to please one person over another. What HR could do is to work with the company leaders and try to figure out if the rules make sense in today's economy.

Anonymous said...

While no one may understand the 6 month rule (we don't have all the information necessary to understand it), it's a moot point - and I'm surprised no one has addressed this. You signed the contract. You accepted your severance. You will not be hired on again for 6 months. I'm sorry to be so harsh, but you should have asked more questions BEFORE you signed a binding contract. Repeatedly calling HR and demanding explanations and questioning decisions is only going to prevent you from being hired on after 6 months. While you may disagree and not understand the rule, you accepted it when you signed on the dotted line. Now you must wait.

Anonymous said...

The previous anonymous' comments bring up a question I have: Do you HAVE to sign a General Release when you are let go? What type of time frame does a person have to read it and decide if they 'agree' to the terms? And if they don't agree and don't want to sign it, does that make them inelligible for severance and whatever other 'perks' the company may be offering? I'd love to know more about this before it becomes my fate. Maybe other readers might like to know too.

Ask a Manager said...

Anonymous, you do not have to sign a general release, but you do need to sign it if you want to get severance. If you don't sign it, you don't get the money. Responsible companies will give you several weeks to decide whether or not to sign it, encourage you to consult with a lawyer before signing if you want to, etc.

Anonymous said...

When I was laid off from a previous position (entry level, no severance, no signing necessary) I distinctly remember the HR manager telling the entire group effected--if we were hired back before six months our benefits would continue like they never ceased. For example, we would have kept our tenure, continued to accrue vacation & sick at the same rate, our medical & dental, etc. would continue from the rehire date. The six month clause must be so that the employee has to 'start over' like they never worked for the company before. Thus saving the company $ in benefits.

Suzanne Lucas said...

Anon--that's a company decision based on your defined plans.

Anonymous said...

actually an odd state law--maybe they must be in the same state I was

Anonymous said...

Hi Anonymous...the purpose of the General Release is to protect the employer from an employee lodging a legal challenge. The typical compromise is that the employer will offer you a severance package, but in return you are giving up the right to legally challenge them for additional monies or anything else (through signing the General Release).

If you choose not to sign the General Release, you're basically telling the employer that you want the opportunity to go the legal route, so no, they will not pay you the severance. They will assume that any severance will be determined through legal avenues instead.

Have a lawyer look at your severance package and the General Release before signing anything, and use your common sense as to whether a legal challenge would net you any more money than the offered package (minus lawyer's fees and time).

Anonymous said...

I'd be most interested in pursuing the exceptions the person says he/she is sure have already been made. As with the others who commented, I believe that if there's a legal contract, HR absolutely should NOT make exceptions, as it does open an ugly door. If the writer can gather info on the exceptions that have already been made, he/she could theoretically point out that NOT making an exception for him/her is biased or problematic. (Especially if the other exceptions show bias - e.g. all exceptions have been white and male, etc.)

so far, the only "reason" that makes any sense so far is the "strange state law" reason mentioned by one of the commentors. If there is a financial burden gained by rehiring within 6 months, there is at least some logic behind including this provision in the release.

Holmes said...

Couldn't the company just waive the "6 month rule" at their discretion? Of course, the managers would have to get it past the lawyers, and that is next to impossible usually.
I don't quite remember my contracts law classes, but it seems that the 6 month rule is not a condition precedent to the contract- it's a term carried out subsequently and thus could be waived by the enforcing party, which, in this case, is the employer.

Anonymous said...

Eww. This is a nasty one. It does sound like the company wants to prevent reinstatement of benefits, and it's likely that if you're offered a position after the waiting period has expired, it'll be at a lower salary.

My vote goes with what HR Goddess said above. You sound very much in demand, so use that to look for a step up elsewhere.

Anonymous said...

This "6 month rule" doesn't make any sense to me to be in the severance release agreement.

I think of two things when I see the 6 month reference:

For staffing planning purposes, it is wise to consider whether a position should be eliminated if the position will be needed again within 6 months. If so, then not worth the hassle to downsize that job.

Secondly, if the company RIFs the individual (in a protected class), hires a different individual (unprotected class) soon thereafter, then perhaps the RIF decision could be legally challenged as a pretextual reason for the termination that disguised a discriminatory reason.

joanna said...

At our company, we can waive, at our discretion, the clause about employees not seeking re-employment within the company. For the other terminated employees who ask about it, we say it is a standard part of the agreement (which it is.)

joanna said...

P.S. It makes sense that the "6-month rule" may be part of a benefits reinstatement requirement. Regardless, this should have been discussed before the separation agreement was signed.

Anonymous said...

If you sign a general release and you have a pending worker's comp claim outstanding...are you waiving the right on that? Or does the Workers Comp case (California) continue to remain open? Sorry...I know it is a bit off topic, but I am in need of this information! Thanks.

Anonymous said...

If the language in a severance package uses language "in consideration for signing this agreement" ... and offer outplacement services based on your current position; you will have 12 months from your Termination date to intitate these services, and they include applying for openings with the company that you are qualified, and even offering a "priority consideration code to use" why wouldn't you have a fail to hire claim? You're responding to the language in the severance package/contract/agreement.