Laid-Off Microsoft Workers May Not Have to Return Severance

An employment lawyer says it's unclear whether Microsoft can force ex-employees whom it paid too much severance to give back that money. It may depend on whether the overpayment was obvious to the employee.

By Gregg Keizer
Mon, February 23, 2009

Computerworld — Microsoft's decision to ask some of the 1,400 people it laid off last month to return part of their severance package is "bad PR," a Seattle-based employment attorney said Monday.

And if the error wasn't obvious to employees when they signed their agreements, they might not be required to pay back the money, said D. Jill Pugh, a Seattle attorney in private practice who has reviewed several of the Microsoft severance agreements.

Microsoft has sent letters to an unknown number of the 1,400 workers it laid off Jan. 22, citing an "administrative error" that resulted in an overpayment, according to a document obtained by TechCrunch.

The letter, dated Feb. 18, asked the workers to return a portion of their severance in the form of a check or money order made out to "Microsoft Corporation" in the next 14 days.

"This letter is to inform you that an inadvertent administrative error occurred that resulted in an overpayment in severance pay by Microsoft," the letter read. "We ask that you repay the overpayment and sincerely apologize for any inconvenience to you."

Pugh, who specializes in employment law, was surprised by Microsoft's demand. "In 15 years of doing this, I've never seen this come up," she said. "Occasionally, I've dealt with overpayment [issues] for people while they're still employed, but never on a severance package."

Pugh said she has reviewed three former Microsoft employees' severance agreements in the last month, and characterized them as "otherwise pretty reasonable." But this news left her stumped. "If only for the bad PR, this is not a good idea," she said.

It's unclear, Pugh added, if Microsoft can force the laid-off workers to return part of the severance. "The law is not crystal clear," she said. "It may depend on whether or not it was obvious to [the former employees] that there was an error. A lot of the people laid off were salaried employees, who often don't know exactly what they make in a week, minus taxes. But severance is usually termed as a number of weeks, such as 12 weeks or 8 weeks.

"If they thought they were going to get, say, $5,000 in severance, but actually got $20,000, that's obvious," she added.

Pugh recommended that people contact a lawyer if they're asked to return part of their severance package. "If it was one of my clients, I'd contact the attorneys at Microsoft and negotiate," Pugh said. "If it was a smallish amount, under $2,000 or so, I'd argue that it was Microsoft's error. After all, the [former] employee has had to sign away considerable rights when they signed the severance agreement."

Microsoft did not return a call for comment, but the company has confirmed the letter's authenticity elsewhere, though it did not specify the number of people affected. A Microsoft spokesman also told the Seattle Post-Intelligencer that some former employees received smaller severances than they were owed, and would receive the difference.

That sparked another comment from Pugh. "That opens up questions of whether or not the release/waiver of claims is even valid [in the agreement]," she said in a follow-up e-mail Monday.

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