Severance Agreements

Most severance agreements have a mutual non-disparagement clause. The clause prevents both employees and employers from speaking negatively about each other in a public space. Many of these agreements use the term “Company,” which includes the employer itself, along with any of its officers, directors, employees, agents, etc.

These types of non-disparagement agreements are very broad. Employers can easily use them against the employee to disqualify them from receiving the benefits they agreed to under the severance agreement.

A non-solicitation clause is typically an agreement between the employee and employer. The employee agrees not to solicit any of the company’s clients or customers for their own benefit or the benefit of its competitors. These types of agreements are often bundled with Non-Disclosure and covenants not to compete (non-compete agreements).

These types of agreements are only enforceable if:

1.  the employer has a legitimate business reason for the clause- such as protecting customer lists or trade secrets.
2. the customer list is worth protecting- meaning the company has spent time, energy, and money establishing its client database, and that database is not generally available to the public; and
3.  the employees and customers can leave freely- meaning that the employer’s customers and employees can leave voluntarily.

The experienced attorneys at the Derek Smith Law Group have years of experience deciphering the often-cryptic severance agreements drafted by employers. These agreements are often designed to confuse a prospective employee who doesn’t fully understand their rights and responsibilities. Our discrimination attorneys at the Derek Smith Law Group comb through these agreements, ensuring that every right of an employee is protected.

An agreement and release is another term for a severance agreement. There are two major parts of a severance agreement: the agreement and the release. The agreement outlines what an employee gets in return for their release.

The agreement usually outlines what an employee’s severance package consists of. For example, the employee receives a lump sum of money and benefits for six months.

The release is a statement releasing the company from any liability associated with the employee’s termination. The release is a waiver of all claims, including discrimination claims the employee may have against the employer.

Like any other contract, a severance agreement requires consideration. Consideration is something of value that a person is not already entitled to give in exchange for the agreement to do, or refrain from doing, something.

Most people incorrectly assume that pension benefits or payment for earned vacation or sick leave would count as consideration. Employees are already entitled to earned vacation days and pension benefits. Consideration must be something in addition to those things employees are entitled to, such as a lump-sum payment of a percentage of the employee’s annual salary or periodic payments of the employee’s salary. The employee’s signature and retention of the consideration generally indicate acceptance of the terms of the agreement. Our skilled discrimination attorneys at the Derek Smith Law Group have poured over many severance agreements and are experts at dissecting these agreements’ complicated terms.

While there is no “typical” severance package, most severance packages include pay for a specified amount of time, transfer of earned employee benefits, and any fringe benefits associated with the employee’s employment. The law does not specify what belongs in a severance package agreement. Therefore, it may cover a few months of future pay and benefits to a year or more of coverage.

Whatever the severance package is worth, your signing prevents you from filing a lawsuit against your employer for wrongful termination, retaliation, or any other wrongdoing. Therefore, your employer may add to its benefit to entice you to sign it.

No matter how enticing the severance agreement appears, speak with a qualified employment attorney before signing it.  Make sure the agreement is fair, equitable, and worth signing.

Generally, a severance agreement includes a full release of claims. A full release of claims usually minimizes the risk of potential litigation. An employee agrees to release (or waive) the employer from liability regarding all claims connected with the employment relationship, including discrimination claims under the civil rights laws.

The ADEA has added the Older Workers Benefit Protection Act (OWBPA).  It includes additional protections for employees over forty. Before the claim’s release can be valid, the OWBPA establishes the specific requirements for the “knowing and voluntary” release of ADEA claims.  These are designed to ensure that every older employee has the opportunity to make an informed choice regarding signing the waiver.  At minimum:

• Employers must write the waiver in a manner that employees can clearly understand.
• The waiver must specifically refer to the rights or claims arising under the ADEA.
• The waiver must advise the employee in writing to consult an attorney before accepting the agreement.
• The waiver must provide the employee with at least 21 days to consider the offer.
• The waiver must give an employee seven days to revoke their signature.
• The waiver must not include rights and claims that may arise after executing the waiver.
• The waiver must be supported by consideration in addition to that to which the employee is already entitled.

Lastly, these agreements will be invalid and unenforceable if an employer used fraud, undue influence, or other improper means to coerce an employee into signing it or if it contains a material mistake, omission, or misstatement.

Call today to speak with our New York City, New Jersey, Miami, Los Angeles, or Philadelphia severance package agreement attorneys for a free consultation.

Generally, a releasor is the employee, whereas a releasee is an employer. The severance Agreement outlines the rights and responsibilities of the releasor and the releasee upon termination of the releasor’s employment. Most severance agreements state that the releasee will pay the releasor the amount of money and the benefits described in the Severance Agreement.

The majority of severance agreements state that the releasor agrees not to bring any claims against the releasee which arise out of the releasor’s termination. Normally, these agreements state that the releasee and releasor will attempt to settle any further disputes arising out of the releasors termination out of court, usually through arbitration.

Sometimes, a severance agreement contains a mutual release. A mutual release is an agreement between the employer and employee where both parties agree not to sue the other party. The agreement prevents either party from filing claims which may normally arise out of terminating employment. In most mutual releases, the parties agree to arbitration of any lingering claims.

As an employee, it is important to remember that a severance agreement is a contract. There is no law requiring employers to offer severance packages to employees. Therefore, employers would not make the offer unless it benefited them in some way.

Before signing any contract in New York City, New Jersey, Miami, Los Angeles, or Philadelphia, an employee needs to consult legal counsel with specific experience reviewing and negotiating severance agreements. The attorneys will help you determine what employee rights or claims you may be giving up, if any.

Severance agreements usually include a release of an employee’s right to sue the employer. If you think you have been wrongfully terminated because of race, sex, religion, or other discriminatory reason, you may want to think twice about signing a severance agreement. You should carefully weigh the benefits of signing a severance agreement against claims an employee might have against an employer, the likelihood of winning a court case or settlement, and the probable costs.

It is also important to have a severance agreement attorney determine if the agreement is fair and reasonable. Severance agreements are negotiable. It may be necessary to negotiate such aspects of the agreement regarding compensation, non-compete clauses, confidentiality or non-disclosure clauses, stock options, placement assistance, and other provisions.

In some cases, employers are required to provide a period (Grace Period) for an employee to consider the severance agreement. The employer may not rescind the offer during the waiting period.