Corporate Downsizing Perils


The COVID-19 outbreak has turned many American industries on their head and in a very short amount of time.  Business sectors are already struggling, and economic futures are at best precarious to say the least.  Retail and entertainment markets are already being forced to downsize, and this terrible predicament will ultimately trickle throughout many U.S. companies.

Most employment dissolutions that are bound to take place in the coming months will hopefully be done so with amicable intentions.  Of course employees will be generally and understandably upset, but the break-up of employee and employer will likely be beneficial and necessary for some corporations to survive the short and long runs.  Severed employees must come to grips that the business was ill-prepared or lacked the resources necessary to provide a successful future.  The past must eventually be accepted so that the severed employee can emotionally and psychologically move forward, move on to the next phase of life.  As a token of good will and possible liability relief, conscientious employers will provide a comprehensive severance package at the moment of termination to help the newly unemployed through the seemingly difficult transition.

American business severance agreements frequently include, but are not limited to the following: additional income in regularly scheduled terms of months or years, payment for unused vacation time or sick leave, stock options, retirement benefits and limited continuation of life, dental, medical and disability insurances.  The purpose of this communication is to address the employer’s contractual promise of disability insurance.  

Employee benefits are financially imperative to millions of Americans.  Most have become economically dependent upon employer-sponsored insurances that not only serve to protect the covered employee, but may reach to protect that employee’s immediate family as well.  Often taken for granted by those the programs benefit, the corporate expense of maintaining such employee benefits can be fiscally straining to any company, no matter the size.  But as previously mentioned, dutiful employers may extend coverage through a severance arrangement.  And therein lies the problem.

Group insurance carriers require the immediate removal of a severed employee from an employer-sponsored plan with the possible offer of conversion to individual coverage.  Family or individual life, dental and medical insurance policies are available from any number of insurance companies.  Disability coverage is the exception.  Without future employment contracts in place, traditional disability carriers will not insure an unemployed person no matter how recently that person was terminated.  Since most employers and severance agreement drafters are unaware of this dilemma, they frequently open themselves to great liability risks and threat of lawsuit.

Petersen International is able to assist employers, your clients, in mitigating such liability and avoiding the unnecessary and potentially expensive need for self-insurance.  The Petersen International Severance Disability Insurance Plan provides a recently severed employee with long term monthly and lump sum disability benefits which can be sculpted to fit the requirements of any legal severance agreement. 

It’s quite uncomfortable to contemplate loss of employment or the firing of an employee during times of global conflict or natural disaster, but the reality is that the need for corporate downsizing will eventually occur due to current economic forecasts. Contact us for more information about pitching this product to your business-owner clientele.

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