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Understanding the buyout negotiation process

On Behalf of | Apr 8, 2022 | Business & Commercial Law |

Most companies want to avoid layoffs at all costs. However, during times of economic downturn or just when the business isn’t bringing in as much revenue as it did in the past, these decisions must be made. 

An alternative to layoffs and handing out pink slips is voluntary employee buyouts

What are employee buyouts?

If a company needs to reduce what is paid through payroll, remove workers from a position, or reduce the number of positions (for any reason), they may offer an employee buyout. This “package” varies from one company to another, and employees always have the option to refuse it. It is also possible to negotiate the buyout terms. 

What’s the benefit for employers?

Employees typically must sign a release of liability or indemnification with a buyout package. This means that the employee accepts the buyout and that they no longer have the right to sue the employer for employment discrimination or wrongful termination. 

Most of the buyout offers will include a statement that the employee is voluntarily terminating their employment or quitting. 

Why are clear and concise terms important?

If employers plan to offer employees the buyout option, it is essential that the terms be written out in a clear and concise manner. This ensures there’s no confusion about what the buyout is and what it establishes. This type of language can also help prevent issues or misunderstandings that could cause problems for the employer in the future. 

Understanding the buyout process

When businesses first form, they may decide if they will offer employee buyouts if the need arises. This can be a part of the initial planning. In many cases, these buyout offers are beneficial for both employers and employees and something to consider offering.