EXPERT LEGAL COUNSEL TO ENSURE A SOUND SEVERANCE AGREEMENT
What is a Severance Agreement?
A severance agreement is a legally binding contract between an employer and an employee that outlines the terms and conditions of the employee’s departure from the organization. It is typically offered when an employee is laid off, terminated, or resigns under specific circumstances. The agreement may include financial compensation, benefits, and other considerations in exchange for the employee waiving certain rights or claims against the employer. In many instances, the agreement is negotiable and it is extremely important for the employee to understand how each clause in the agreement affects the employee's life in the present and moving forward.
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If you are on the verge of receiving a severance agreement, or you have already been provided with a severance agreement by your employer, schedule a document review consultation with our experienced attorneys to fully understand your rights.
MORE ON SEVERANCE AGREEMENTS
Key Components of a Severance Agreement
- Severance Pay:
- A lump sum or continued payments based on the employee's tenure, salary, or other factors. These factors may have a direct correlation to the potential liability held by the employee against the employer.
- Health and Other Benefits:
- Extension of health insurance coverage (e.g., COBRA), retirement plan contributions, or other benefits.
- Release of Claims:
- Employees often agree not to pursue legal claims (e.g., discrimination or wrongful termination) against the employer.
- Non-Compete or Non-Solicitation Clauses:
- Restrictions on working for competitors or soliciting clients or employees after departure.
- Confidentiality Clause:
- Prohibits the employee from disclosing sensitive company information.
- Return of Company Property:
- Requires the employee to return items such as laptops, phones, or keycards.
- Outplacement Services:
- Assistance with finding a new job, such as career counseling or resume services.
- Mutual Non-Disparagement Clause:
- Both parties agree not to speak negatively about each other. Though, there are nuances regarding the language included in the agreement.
- Effective Date and Revocation Period:
- The agreement specifies when it takes effect and allows for a review or revocation period, often required under certain laws.
Legal Considerations
Age Discrimination Claims: If the employee is over 40, the Older Workers Benefit Protection Act (OWBPA) requires the agreement to:
- Be written clearly.
- Advise the employee to consult an attorney.
- Provide at least 21 days to consider the agreement and 7 days to revoke after signing.
Unpaid Wages: Employers cannot condition severance pay on waiving claims for unpaid wages or overtime owed.
Why Employers May Offer Severance Agreements
- Minimize the risk of lawsuits by securing a release of claims.
- Maintain goodwill with the departing employee.
- Protect sensitive company information or business interests.
What to Do if You're Offered a Severance Agreement
- Take Time to Review:
- Ensure you understand the terms and their implications.
- Consult an Attorney:
- A lawyer can assess whether the terms are fair and advise on negotiations.
- Negotiate:
- You may request changes to severance pay, benefits, or restrictive clauses.
- Understand Your Rights:
- Ensure the agreement does not violate labor laws or unfairly limit your future opportunities.
Severance agreements benefit both parties by providing financial support and legal protection to employees while reducing risk for employers.