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Reviewing And Negotiating Severance Agreements

Companies offer severance agreements to certain employees following their termination. Most companies are not obligated to pay a severance. While others are bound by employee contracts or collective bargaining agreements (i.e., union terms of employment) and, therefore, must provide employees with severance pay.

Severance may also be required by statute. For example, the Worker Adjustment and Retraining Notification Act requires employers with 100 or more employees to give 60 days’ notice before a plant closing or mass layoff. If an employer fails to do so, it must pay 60 days’ wages as severance to affected employees. Except for some state and local laws that entitle employees to severance pay, no other legal obligations exist that force employers to offer any form of severance. However, most employers voluntarily choose to do so to protect themselves from any future lawsuits and give employees a bit of breathing room following an unexpected job loss.

What do severance agreements usually include?

Severance agreements tend to be complicated and are typically designed to benefit the company rather than the employee. Therefore, it’s helpful to know what characteristics are common in severance agreements, such as:

  • Purpose – This is usually a short statement specifying the goal of the agreement and the company’s intent in providing severance pay;
  • Conditions – Outlines under what circumstances employees are eligible for severance pay and what terms must be met before payment is made;
  • Groups Covered – Severance policies might not apply to all employees, so companies specify precisely what types of employees are eligible;
  • Pay Calculations – Guidelines for how severance pay will be calculated and policies regarding unused vacation, sick days, and other unpaid benefits;
  • Documents – A company can require employees to sign documents like non-disclosure agreements, legal releases, and non-competes before the severance is paid; and
  • Right to Modify – Agreements usually offer some protection for the employer, which allows them to amend or terminate severance pay under certain conditions.

When an employee signs a severance agreement, they typically waive their right to bring any future legal action against their former employer. Sadly, most people do not realize just how negotiable severance agreements are. So before you agree to the unilateral terms offered by your employer, talk to one of our experienced employment law attorneys. We will explore the circumstances of your departure, whether planned or unplanned, and dig for additional leverage. We’ll explain the complex legalese and help ensure that your deal is as fair as possible. Contact us online or call 888-943-1352.