Before You Quit Your Job: What You Need to Know

If you're thinking about leaving your job, then you'd better think about what your departure will mean to you besides finally escaping a position you've outgrown.

Most departing employees don't give a second thought to their exit strategy until it's too late; that is, until well after the bloom is off the rose, the honeymoon is over and the time to move on, voluntarily or involuntarily, is fast approaching.

Fortunately, just because your job ends doesn't mean your rights do. In some cases, you'll still be entitled to unemployment compensation, continuation of health coverage, perhaps even a severance check.

The best time to get a clear picture of your exit strategy is before you accept a job, when you can still negotiate how your swan song will play out. Unfortunately, that's a little like bringing up a prenuptial agreement on the eve of your wedding."Most people who lose their job aren't ready to lose their job," says Tim Willoughby, a St. Louis employment attorney. "They don't have a year's income in the bank, so they go out frantically searching for new work and they're so thrilled to get an offer that they aren't going to mess it up trying to drive a hard bargain.

"In order for you to have enough bargaining power to get what you want on the front end, you've got to be willing to walk away from the deal. Most people don't have that willingness."

Still, Lauren Herring, a St. Louis outplacement firm, says an awareness of post-employment issues can help you maintain balance and move ahead when you've been knocked off your horse."The first thought is usually along the lines of, 'I can't believe I've been fired!' followed by feelings of rejection and other issues related to the personal tragedy of losing their job. But there are a lot of practical issues like insurance, unemployment and vacation pay that need to be addressed," says Herring, director of international sales and marketing for The Impact Group.Here are the most important topics to be addressed when you and your employer part company:Health Insurance Whether you quit, are laid off or fired for anything short of a criminal offense, you are guaranteed continuation of your health coverage under the 1986 federal Consolidated Omnibus Budget Reconciliation Act, commonly known as COBRA.Under COBRA, companies with 20 or more employees must offer you the option of continuing coverage under their health plan for a specified period, usually 18 months. Some states have laws that enhance the COBRA offer by applying it to smaller companies or extending the benefits. In most cases, your employer must offer you COBRA coverage within 30 days after leaving, and you have 60 days to elect coverage.
The good news is that COBRA guarantees that you can continue coverage for you and your family under the company's negotiated group rate with its health care provider. In the event of your death, your dependents may continue COBRA coverage for up to 36 months.The bad news is, COBRA guarantees you continuation of coverage at your expense, not the employer's. Unless you've negotiated otherwise with your employer as part of a severance package, you'll have to pay the premiums that previously were picked up by your company.Details on COBRA can be found at the U.S. Department of Labor's COBRA Web site.Unemployment Benefits On the face of it, unemployment insurance seems pretty straightforward: You file with your state unemployment office for benefits, usually a portion of your previous pay, designed to help you get back on your feet. Most unemployment benefits run out at about 26 weeks."If you're laid off, you absolutely are entitled to unemployment," says Amy Delpo, an Oakland, California-based employment law attorney and legal editor for "If you're fired, unless you are fired for something really egregious, you're still entitled. If you quit, in some instances you are still entitled."But Willoughby says unemployment compensation, actually a joint program between federal and state governments largely funded by employer taxes, can be complicated.
"You may live in one state, but work in a different state. Where do you file? The benefits differ from state to state, and you have different options depending on where you file," he says. Your state's unemployment or labor department will have the information you need to file correctly.One other thing to keep in mind: Unemployment benefits are considered taxable income by the Internal Revenue Service. So you might need to set aside some money to pay taxes on any payments you receive.Final Paycheck Many states now have laws specifying when you should receive your final paycheck. It may be tied to a number of hours from your date of termination (72 hours is common in seasonal industries), the company's next pay cycle or whether you quit, were laid off or fired. Check with your state's department of labor for more information.Vacation and Sick Leave Your right to be paid for unused vacation or sick leave time may vary by state."Most states require that employers pay whatever you have accrued. Once something is accrued, it belongs to you and it has to be paid," says Delpo. "If you have accrued vacation or sick leave and it doesn't get paid out, you should contact the department of labor in your state."Comp Time Compensation time is typically awarded by management to salaried employees who are exempt (not eligible) for overtime pay. Willoughby says collecting comp time can be problematic depending upon the terms under which it was offered.
"If you do the work because you are required to do it and the employer says he's going to give you a gift and then reneges on it, generally that is not a contract. A promise to make a gift is not enforceable," he says. "But if, on Jan. 1, the employer says, 'If you bust your butt this month and we finish the project, I'll give you three days of comp time,' well now you have a deal."There is no federal statute on the subject, but many states have adopted wage payment and collection laws that can help you collect comp time you feel is due you.Severance Unless you have a contract that provides for it, there is no law that requires an employer to pay you severance pay. That said, company policy (as stated in an employee handbook, for instance) or long-standing precedence could provide you with a valid legal claim to a parting gift."If the employer has given severance as a practice in the past and singled you out not to get it, you might have a legal claim that is probably worth taking to a lawyer," says Delpo.Delpo says some companies may offer one- to two-months of salary to laid-off workers, while more generous employers might offer long-term employees perhaps one month's pay for every year worked for the company. But you may have to sign a severance waiver to collect.
Herring says severance pay is increasingly common in today's more mobile workplace for several reasons: In cyclical industries, the employee you lay off today remains a trained and valuable asset that you may well want to rehire tomorrow. The increased competition for skilled labor has made many companies more aware than ever of their public image. Then there's the "survivor syndrome." Employers want to keep morale high among those who didn't get a pink slip. "Companies really are wanting to maintain a positive relationship with their outgoing employees, for rehiring, for public image and for the remaining employees who want to feel like they are taken care of," she says.Severance Agreement Increasingly common today is the severance agreement (also known as separation agreement or severance waiver), in which you relinquish all rights to sue your former employer. Companies often offer a severance check as an incentive to sign the waiver; no signature, no parting gift."Overall, the severance contract movement is a good thing for most employees," says Willoughby. "Those who have been truly treated illegally by their employer, who have strong legal rights, they are not going to be signing their severance contracts anyway, not after they go see a lawyer."
Be forewarned: Once you sign, there's no going back."You have the right to give up your rights in exchange for money," says Willoughby. "That's freedom of contract and the courts are not friendly to attempts to try to break severance agreements."If you have the high-demand skills to negotiate a severance package before you're hired, you might want to improve your position on a few of these items. For instance, while COBRA doesn't require your employer to pay for your continuing health insurance, you may wish to require that in your severance package."It's a very wise thing to think about negotiating the terms of your ultimate departure," says Willoughby. "It's good to think about how the relationship will end upfront, because they always end."Jay MacDonald is a contributing editor based in is the Web's leading aggregator of information on financial products including mortgages, credit cards, new and used automobile loans, money market accounts, certificates of deposit, checking and ATM fees, home equity loans and online banking fees. Visit to get the tools and information that can help you make the best financial decisions.
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Source: Money & Work

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