Severance Agreements


Employment Severance Package Agreements and Mediation Attorneys

Severance agreements, also sometimes called separation agreements or severance packages are more and more common when a company terminates a person’s 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.

What is a Severance / Servant Package?

A severance package is an agreement between an employer and an employee outlining the amount of pay and benefits an employee will be granted if they are terminated. Severance pay is often granted to employees upon termination of employment. It is usually based on the length of employment for which an employee is eligible upon termination. These severance agreements typically include additional base pay, payment for unused vacation time and the transfer of earned benefits that may not have been in effect at the time of the employee’s termination.

Severance packages are often difficult to understand and most employers will give you a certain time period in which to sign the severance package. The Severance package lawyers at the Derek Smith Law Group represents New York, Philadelphia and New Jersey employees in written employment agreements, non-competes and severance agreements and severance package mediation. Call today for a free consultation about your severance package.
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Employee Concerns When Signing an Employment 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, so the offer would not be made unless it benefited the employer in some way.

Before signing anything contract in New York City, New Jersey or Philadelphia, it is important for an employee to consult legal counsel with specific experience in reviewing and negotiating severance agreements to determine what, if any, employee rights or claims you may be giving up. Our New York City, New Jersey & Philadelphia severance agreement contract attorneys will advise you or your options when dealing with severance agreements offered by employees in New York City, New Jersey or Philadelphia.

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 some other discriminatory reason, you may want to think twice about signing a severance agreement. The benefits of signing a severance agreement should be carefully weighed 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 severance agreements attorney determine if the agreement is fair and reasonable. Severance agreements are often negotiable and it may be necessary to negotiate such aspects of the agreement as compensation, non-compete, confidentiality or non-disclosure clauses, stock options, outplacement assistance, and other provisions.

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

How much is a typical severance package?

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 transfer of any fringe benefits associated with the employee’s employment. A severance package is often predicated on the employee signing their severance agreement which outlines the rights and responsibilities of the employee and employer in the event of termination. Call today or fill out the contact form to speak with our New York City, New Jersey or Philadelphia severance package agreement attorney for a free consultation.

Can you get a severance package and unemployment?

Severance Package Mediation law firm

A severance agreement may disqualify an individual from receiving employment benefits. If a person is involuntarily separated from work they are eligible for unemployment insurance when their employment ends. With regard to unemployment benefits, a person’s employment is terminated the day they are taken off of payroll, regardless of when they were notified of their termination. If the severance package is paid in one lump sum, then an employee may be eligible for unemployment insurance.

However, an employee is paid their severance package over a period of time, meaning their employer kept the payroll, then they may not apply for unemployment insurance until the day they are taken off of payroll. However, if the severance agreement states that the employee has left the job voluntarily, they are not eligible for unemployment insurance. Call today or fill out the contact form to speak with our New York City, New Jersey or Philadelphia severance package agreement attorney for a free consultation.

Are non competition agreements enforceable?

Non-Compete Agreement Attorneys

Non competition agreements are agreements between an employers and employees where the employee agrees to refrain from competing with their former employer for a specified amount of time. These agreements are only enforceable when they are reasonable in scope, to include duration and location. These types of agreements are normally reserved for high level executives, but are popping up in a variety of industries, to include yoga instructors, hair stylists and camp counselors.

Non-competition agreements are best suited for individuals with unique skills or access to trade secrets, as such they have little to no place in standard worker employment contracts. These type 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, Pllc, will work tirelessly to ensure that your non-competition agreement doesn’t cause an unreasonable restraint on your ability to find meaningful employment. Call today or fill out the contact form to speak with our New York City, New Jersey or Philadelphia non-competition agreement attorney for a free consultation.

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 release is a statement releasing the company from any liability associated with the employee’s termination. The agreement usually outlines what an employee’s severance package consists of. While the release is a waiver of all claims, including discrimination claims, the employee may have against the employer.

What does a release of claims mean? |  Executive Contract Lawyers in New York City, New Jersey, Philadelphia & Miami

Generally, a severance agreement includes a full release of claims. This is usually designed to minimize the risk of potential litigation. An employee agrees to release (or waive) the employer from liability in regards to all claims connected with the employment relationship, to include discrimination claims under the civil rights laws.

The ADEA has added the Older Workers Benefit Protections Act (OWBPA) which includes additional protections for employees over forty. Before the release of claim 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 as to whether or not to sign the waiver.  At minimum:

  • the waiver must be written in a manner that can be clearly understood;
  • 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 the date on which the waiver is executed;
  • the waiver must be supported by consideration in addition to that 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 the severance agreement will be invalid if it contains a material mistake, omission, or misstatement. Call today or fill out the contact form to speak with our New York City, New Jersey or Philadelphia severance package agreement attorney for a free consultation.

What is a non-disparagement clause?

Most severance agreements have a mutual non-disparagement clause which states that the employer will not disparage the employee and the employee will not disparage the employer. A lot of these agreements use the term “Company” which includes the employer itself, along with any of its officers, directors, employees, agents, etc. These type of non-disparagement agreements are very broad and can easily be used against the employee as a way to disqualify them from receiving the benefits they agreed to under the severance agreement. Call today or fill out the contact form to speak with our New York City, New Jersey or Philadelphia non-disparagement clause attorney for a free consultation.

What is a severance agreement and release?

Severance Agreement Negotiation Attorneys in NYC-NJ-Philadelphia-Miami

Sometimes called “separation”, “termination” or “separation agreement general release and covenant not to sue,” these agreements are contracts between an employer and employee which outline what happens when an employee is terminated. Like any other contract, a severance agreement requires consideration. Consideration is something of value which a person is not already entitled to that is given 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, which is false. 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 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 indicates acceptance of the terms of the agreement.

Our skilled discrimination attorneys at the Derek Smith Law Group, Pllc, have poured over many severance agreements and are experts at dissecting the complicated terms of these agreements.

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.

Do hourly employees get severance pay?

Unless outlined in the severance agreement, hourly employees do not normally get a severance pay. Severance pay is often granted upon the termination of employment. Most companies base their severance pay on the length of employment at the company. There are no federal requirements for severance pay. Severance pay is an agreement between the employer and the employee.

What is a mutual release?

A mutual release is an agreement between the employer and employee where both parties agree not to sue the other party based on claims which may normally arise out of terminating employment. In most mutual releases the parties agree to arbitration of any lingering claims.

What is a non-solicitation clause?

A non-solicitation clause is typically an agreement between the employee and employer where the employee agrees not to solicit any of the company’s clients or customers for their own benefit or the benefit of one of the companies competitors. These types of agreements are often bundled with Non-Disclosure and covenants not to compete. 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 employers customers and employees can leave voluntarily. The experienced attorneys at the Derek Smith Law Group, Pllc, have years of experience deciphering the often cryptic severance agreements drafted by employers.

These types of agreements are often designed to confuse a prospective employee who doesn’t fully understand their rights and responsibilities under the agreements. Our discrimination attorneys at the Derek Smith Law Group, Pllc, comb through these agreements ensuring that every right of an employee is protected. If you find yourself staring down a confusing severance agreement, give the skilled attorneys at the Derek Smith Law Group, Pllc, a call, toll-free, at 877-469-5297 to discuss your potential case.
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Employer Cautions

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

Effective settlement agreements have certain aspects in common. They must be in writing, must be signed by the employee, must be supported by adequate consideration and should be easy to read. It is important to ensure that the employee understands the agreement and signs it willingly.

To survive a court challenge, it is helpful to be able to show that the employee had a sufficient amount of time to think about signing the agreement. Moreover, if the agreement is seeking a release of any claims for age discrimination, an employee must be given 21 days to consider the agreement, then seven days to rescind after signing. It is often useful to encourage an employee to review the agreement with an attorney before signing it and to negotiate some of the terms and conditions of the release.

Employers should consult with an attorney experienced in employment law and the preparation of severance agreements in order to ensure that all relevant statutory and procedural requirements are met.


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