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What to do once you've
been handed a pink slip
By Jeffrey
Yamaguchi • Bankrate.com
For weeks my co-workers and I knew
that layoffs in our Internet company's office were imminent. Our
conversations never focused on if it was going to happen. Indeed,
all speculation centered on trying to pin down when we'd
be paid a visit by the human resources director and given our walking
papers.
The running joke in the office was to tell a
co-worker that the HR director was flying in from the home office
to have a meeting with us in New York. A look of panic would seize
the co-worker, and before he could say anything, you'd blurt out,
"Just kidding." The co-worker would keep staring, and you'd have
to say, "Really, I'm joking. The HR director isn't on her way."
The precariousness of our situation kept the
joke relevant, and though it got old, it worked every time.
But when a senior VP stormed out of the elevator
one fateful morning and announced that the HR director would be
arriving in New York for a 1 p.m. meeting, we knew the day had arrived.
He was the type that was paid enough not to joke.
No one really said anything. People just started
gathering up their stuff and deleting personal computer files and
e-mails.
Hugs and kisses it was
not
A militaristic efficiency took over the second the HR director arrived.
She immediately gathered everyone around the conference table, handed
us individualized information packets explaining our severance packages,
told us our computer access would be cut off within 30 minutes and
told us to be out of the office by the end of the day. Hugs and
kisses it was not. Again, no one really said anything, though the
looming computer access cut-off instilled a greater sense of urgency
to deleting personal computer files and e-mails.
This isn't a unique story. Workers in the dot-com
industry are being laid off in droves -- a recent study put the
number at over 21,000 during the past year. These days, conversations
around a dot-com office's water cooler, or perhaps the oft-photographed
foosball table, are less about stock options and more about how
unemployment insurance works.
Obviously, the top priority for a worker who
has been laid off is to find a new job, but there are several other
important matters to sort out and take care of once you've been
handed a pink slip. Getting to the nearest bar as quickly as possible
does count as an "important matter" in this circumstance, but first
we'll focus on health insurance, your 401(k), unemployment insurance
and those lovely "golden handcuffs" -- stock options.
COBRA won't bite, except
into your wallet
This acronym, which derives from the Consolidated Omnibus Budget
Reconciliation Act, has become part of the lexicon of the unemployed.
COBRA is a federal law that allows you to continue your health care
coverage after you leave your job. Here's the part that bites: You
are responsible for paying the cost of the coverage, and there is
a maximum continuation period of 18 months.
Kirsten Widner, a human resources professional
who works in San Francisco, notes that you have 60 days to decide
if you want to elect COBRA, and that within those 60 days, you can
elect retroactively. This means that if you break your arm on the
59th day, you can elect COBRA and you will be covered. Break your
arm on the 61st day, and you'll pay for that cast yourself.
"Generally, the savvy person doesn't elect COBRA
unless they need it in that 60 days, because presumably you will
find another job within 60 days and your new job is going to offer
insurance coverage," she says. "If your new company's insurance
picks you up quickly, then there's no point in having paid for it
during those 60 days."
There are two circumstances under which you
should not play the 60-day waiting game, Widner says.
"If you have a pre-existing condition, you want
to elect COBRA immediately. A new medical carrier can exclude you
from coverage for a pre-existing condition for 6 months to a year
if you can't show that you've had continuous coverage," she says.
"The other reason that you should elect immediately is if you plan
to go overseas. You don't want to be trying to call and get COBRA
activated retroactively if you're traveling."
Unemployment insurance
Each state has different eligibility requirements for unemployment
insurance and benefits. Basically, if you've become unemployed through
no fault of your own (such as being laid off) and you meet your
state requirements for wages earned or time worked during a certain
period, you likely will qualify for unemployment benefits.
Natalia Lincoln, one of my former co-workers,
applied for unemployment the week after we got the boot.
"You should do it quickly because it takes your
benefits a couple of weeks to start up," she said.
Lincoln said the application process was painless.
Indeed, she didn't even have to stand in any lines, perhaps the
most common image one conjures up when thinking of getting unemployment.
In our part of New York, you can apply for unemployment over the
phone. Her main recommendation is to make sure you have your federal
taxes withheld. "Otherwise, you'll really get kicked in the rear
at tax time."
One issue that keeps some from applying for
unemployment has nothing to do with eligibility, and is more about
a perceived stigma. Nelson Taylor, another of my former co-workers,
hasn't yet applied for unemployment for precisely this reason.
"It makes you feel like you're on welfare,"
said Taylor. "Instead of being laid off, it makes you feel like
you were fired."
Lincoln's attitude is more practical: "I didn't
ask for this. Our department went belly up. That wasn't me being
irresponsible; it's just how the chips fell. Plus, I pay taxes,
and now I'm actually reaping a benefit of being a taxpayer. No one
should feel bad about getting unemployment checks."
Visit the Department
of Labor's Web site to get the details on eligibility requirements,
as well as contact information, for the state in which you reside.
The 401(k) temptation
Now that your income has been cut off, the issue of money is front
and center. The main thing here is not to make any rash decisions
with your retirement money. It's not for rainy days, remember, but
for your golden years.
"There's a temptation for a lot of people who
have a 401(k) to take their money out of that when they are laid
off, as a cushion, or just to get their money back," says Widner.
"But there are huge tax penalties for doing that -- huge
tax penalties. It's much better, if you can afford it, to leave
your money in there and wait until you either get another job, so
you can roll it over into your new company's 401(k) plan, or until
you set up a personal IRA that you can roll it into."
One other thing: be sure to find out what kind
of exit fees, if any, you'll have to pay to transfer your 401(k).
Get the details from your HR director and a representative from
the financial institution that manages your company's plan.
Stock options, with even
fewer guarantees
If none of your options has vested, well, you've got no options.
Not that your dreams of dot-com millions were going to come true
anyway. But if you've reached a vesting point and have not yet exercised
your options, ask your HR director how many days you have to make
the purchase.
"If you're being laid off, then it's probably
because the company is dealing with some financial issues. If your
company is pre-IPO, then I would recommend waiting until the very
end of that period. Because you want to see if they are able to
make any financial turnaround as part of restructuring," Widner
says.
Be sure to double-check the time frame your
HR director specifies against the original paperwork you signed
at the time you were awarded your options. Here's a major rub: If
you decide to exercise your options, and your former pre-IPO company
never goes public, your stock is almost guaranteed to be worthless.
Seeking new heights and
reaching the bar
Finally, about the matter of getting to the nearest bar, briefly
mentioned earlier. There's a natural tendency to let a depressive
mood take over at down-and-out bar stool gatherings. Don't let that
happen. Focus on the new opportunities that lie ahead.
If that's not working, even after a couple rounds,
get ruthless and make fun of all that was wrong with the company
that just sent you on your way. People will be raising glasses and
laughing, and it will be hard to get a word in edgewise.
Jeffrey Yamaguchi runs workingfortheman.com
and is the author of Working For The Man -- Stories From Behind
The Cubicle Wall.
-- Updated: May 6, 2003
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