Severance Agreements

“I was in shock when I lost my job – I didn’t see it coming. They offered me a severance package, but I don’t understand some of the terms of the agreement. They said not to worry, it’s just a few technicalities. Am I making the right move by signing it now and taking the money?”

A layoff can be a traumatic experience. The sudden loss of income and benefits can cause financial stress and uncertainty. Employees may also feel a sense of betrayal and loss of self-esteem, especially if they have been with the company for a long time. That’s where the pressure comes to sign a severance agreement.

It is often said, “don’t sign anything until you’ve talked to a lawyer.”  In fact, many severance agreements have provisions stating that you’ve been given ample time and opportunity to meet with an attorney.  Some severance agreements go further, allowing an individual to take 21 days to review before signing and then take 7 more days after signing to reconsider. You might be wondering, why all the extra time to review and reconsider, and do I actually need to speak with a Boston severance agreement lawyer?  Let’s take a moment and look at these more carefully.

What is a Severance Agreement?

A severance agreement, also known as separation agreement, is a binding legal agreement between an employer and employee that outlines the terms of that employee’s separation from the company.  The use of severance agreements has become commonplace, especially with the increase of layoffs.

These agreements often provide a package of additional compensation, health benefits, continued salary, and other offers – all of which often look attractive to any employee losing their job, especially in a tight economy.  It’s the rest of the agreement that requires attention.  Because that agreement may prohibit you from finding new work.

This is where a lawyer experienced with severance agreements may be able to help.  The attorneys at Gordon Law Group, LLP are frequently cited among the best employment lawyers in the nation. Based in Boston, they represent employees facing layoffs and terminations in workplaces across the country.

Be Clear and Direct About What is Important to You

When negotiating a severance agreement, it is important to be clear and direct about the terms that are important to you. Severance agreements typically include broad provisions, some of which may be perfectly fine, while others may require be problematic. A few of the main terms you should be wary of:

Release of Claims

One of the main terms in every severance agreement is the release of claims. In exchange for the severance payment and benefits, the employee agrees to release any claims they may have against the employer for any reason, including discrimination, harassment, or wrongful termination. This can limit the employee’s ability to seek legal remedies for workplace issues that have occurred.  For example, if you’re being fired because of your age, and your employer keeps the younger workers or hires someone younger to replace you, you would be giving up your rights to sue for that.  Or, if you’re being terminated because you complained of non-payment of wages or because you are a whistleblower or because of your race, you would be giving up your rights to sue for those claims.

In short, releases that require an employee to give up any claims she may have against the employer and all of its affiliated entities forever should not be signed lightly.

Non-Competition

Another drawback is the non-competition clause.  Many severance agreements now say that in exchange for the money being paid, the employee agrees not to work for a competitor for some period of time.  Enforceable??  In many cases, yes.

Confidentiality

Another drawback is the confidentiality clause. Many severance agreements include a clause that requires the employee to keep confidential information about the employer or the separation. This can restrict the employee’s ability to speak out about workplace issues or to seek support from others.

Non-Disparagement

Severance agreements often contain broad non-disparagement clauses terms that limit what an employee can say about the company, its management, and any of its employees, attorneys and insurance companies, even if it’s the truth.  And, often the non-disparagement restriction is one way, meaning the employer and management has no restriction from disparaging the former employee.

Takeaways

The main questions to ask then are as follows:

• do you have any claims against the company that are worth more than the release?  In other words, what’s the real reason you’ve been included in the layoff?
• are all the restrictions worth the amount of extra compensation being paid?
• do you have another job in mind or another business you want to start that would be prohibited by the restrictions?
• are their things about your performance or otherwise you will always need to be able to say?
• How long do the restrictions last?

Understand your company’s motivation.  It may very well be, for example, that you are being terminated in retaliation for complaining about discrimination or because the company wants to avoid paying you a commission.  Those claims all go away once you sign that release.  Or, maybe your company is concerned about what you can say or who you can work for after you’re gone.  In those cases, the noncompete and non-disparagement clauses become important.  Or, maybe your company would be willing to keep you around for a period of time – garden leave – to make your job search easier.

Most importantly, if you want to find a new job – especially in the same industry – think about how signing that severance agreement will effect that search.

If you’ve been offered a severance package, contact a Boston severance agreement lawyer today.  The attorneys at Gordon law Group have deep experience negotiating severance agreements and are ready to help.