Severance Agreements

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Severance Package Agreement Lawyer

Employment Lawyers Advocating for Your Rights Regarding Severance Package Agreements

Severance package agreements, also sometimes called separation agreements or severance packages, may help employees pay bills and stay afloat when a company terminates their employment. In the best cases, a severance package provides the employee with financial and other assistance while at the same time protecting the employer from legal action.

Severance packages are often difficult to understand. Most employers will give you a certain time period in which to sign the severance package agreement. You should provide an attorney the opportunity to review your proposed severance agreement package before signing it.

What Is a Severance Package?

A severance package (or servant package) is an agreement between an employer (releasee) and an employee (the releasor) outlining the amount of pay and benefits promised to an employee in the event of termination. A severance agreement typically includes additional base pay, payment for unused vacation time, and the transfer of earned benefits that you may not have used at your termination.

A severance agreement is a voluntary document. The laws do not mandate employers offer them, nor employees sign them. Therefore, a severance agreement will benefit both the employee and employer. If you sign the severance package agreement, you forfeit your right to sue your employer for any wrongdoing.
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What Are Non-Competition Agreements?

Sometimes a severance agreement contains a non-competition agreement. Non-competition agreements stipulate that former employees of a company refrain from competing with their former employer for a specified amount of time. These agreements are only enforceable when they are reasonable in scope and include duration and location.

Non-compete agreements are normally reserved for high-level executives. However, they are popping up in various industries and now include yoga instructors, hairstylists, camp counselors, and more.

Non-competition agreements are best suited for individuals with unique skills or access to trade secrets. These types of agreements may unlawfully restrain one’s ability to find gainful employment in their industry if they are overly broad.

The skilled attorneys at the Derek Smith Law Group will work tirelessly to ensure that your non-competition agreement doesn’t cause an unreasonable restraint on your ability to find meaningful employment.

What Is a Non-disparagement Clause?

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.

What Is a Non-solicitation Clause?

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.

What Is an Agreement and Release?

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.

What Can Be Used as Consideration in a Severance Agreement?

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.

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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.

How Much Is a Typical Severance Package Worth?

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.

What Is a Release of Claims?

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.

What Laws Prevent Employees from Being Forced to Sign a Release of Claims?

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.

Who is the Releasor and who is the Releasee?

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.

What is a Mutual Release?

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.

What Are Some Employee Concerns When Signing a Severance Agreement?

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.

Can You Receive a Severance Package and Unemployment at the Same Time?

A severance agreement may disqualify an individual from receiving unemployment benefits. If a person is involuntarily separated from work, they may be eligible for unemployment insurance.

Concerning unemployment benefits, a person’s employment is terminated the day they are taken off payroll, regardless of when the employer notified them of their termination. If the severance package is paid in one lump sum, an employee may still be eligible for unemployment insurance.

However, suppose an employee is paid their severance pay over a period of time, meaning their employer kept the employee on the payroll. In that case, they may not apply for unemployment insurance until the day they are taken off the payroll.

If the severance agreement states that the employee has left the job voluntarily, they are not eligible for unemployment insurance. Call today to speak with our employment attorneys to learn more about your rights regarding severance agreements and unemployment.

Can Hourly Employees Receive a Severance Package?

Employers often offer severance packages to full-time employees within a company. Full-time hourly employees fall under this category. Therefore, if a company chooses to provide severance agreements, they may provide them to hourly and salaried employees.

There are no laws requiring employers to provide severance package agreements. Therefore, employers are not required to issue any severance package to any employee under any classification.

What Should Employers Know About Severance Agreements?

Employers must be careful to draft fair, legal, and enforceable severance agreements to obtain the desired result of limiting exposure to lawsuits down the road.

Effective severance agreements have certain aspects in common:

  • They must be in writing.
  • The employee must sign them.
  • They must be supported by adequate consideration.
  • They must be easy to read. It is important to ensure that the employee understands the agreement and signs it willingly.

Your employer should show that you had enough time to think about signing the agreement. Moreover, if the agreement seeks to release any claims for age discrimination, an you must receive 21 days to consider the agreement. You must then receive seven days to rescind after signing. It is often useful to encourage you to review the agreement with an attorney before signing it and to negotiate some of the terms and conditions of the release.

Finally, employers cannot use a severance agreement offer to discriminate against employees. Employers may often attempt to dwindle the workforce by enticing older employees, women, men, or other protected classes to take a severance agreement. However, the severance agreement cannot target people in a protected class.

Instead, an employer must offer a severance agreement to every employee in the same department within a company. Anything less may allow the agreement to be used to discriminate against others.

Why Do You Need a Severance Agreement Lawyer to Review Your Severance Agreement?

Your employer doesn’t have to offer a severance package. Additionally, the law does not dictate the provisions of a severance agreement. Therefore, your employer will work to protect their best interests.

You need an attorney that will look out for your best interests. Your severance agreement lawyer can review the agreement to ensure you receive proper compensation for the number of years and dedication you gave the company.

Your attorney can also ensure you are provided the proper timeline to review the agreement fully and ensure your employer and agreement follow all your employment rights. Furthermore, you can discuss any issues, such as discriminatory behaviors, a hostile work environment, or sexual harassment that led to the receipt of a severance agreement.

Your severance agreement attorney can advise you whether to sign the agreement. If they advise you not to sign the agreement, they can negotiate changes to the agreement or help you form a case against your employer for any violations of your employment rights.

Contact Our Severance Agreement Attorneys for Your Free Consultation.

Severance agreements appear to protect your interests as an employee when you leave a company. However, the severance agreement primarily protects the employer’s interests and prevents you from filing any claims for any employer wrongdoing.

Do not sign any agreement until your severance agreement lawyer reviews it and negotiates proper terms. If you need a severance agreement lawyer to review your severance package agreement, the lawyers at the Derek Smith Law Group can help.

Did Your Employer Offer You a Severance Agreement Package When You Left Your Job? Please Contact Us at 800.807.2209 or Email [email protected] to Ask Your Severance Agreement Questions.

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