Cutting the Ties: What You Need to Know About Severance Agreements

June 13, 2017

Separating from an employer, even in the best of circumstances, can be a stressful transition.  When the separation stems from a termination or layoff, however, the unexpected nature of the transition only serves to amplify the stress. It is at this highly stressful time that you may be faced with the decision on whether or not to sign a severance agreement.  Unfortunately, these agreements are not always written in the most user friendly fashion.  Despite this potentially confusing drafting, however, once signed a severance agreement is a binding legal contract that you must abide by.  As such, it is critical that you understand everything that you are agreeing to.

The provision of severance agreement that  often are  of greatest importance is the amount of any severance payment and how it will be paid out. As a general rule, a severance payment represents one to two weeks of your weekly salary per year of employment (i.e. you may expect to receive a payment representing 2-3 weeks of your salary if you had been with the company for two years).  In addition to this payment, if you have not received any other documentation related you to your termination you should also find provisions regarding the payout of any accrued but unused sick or vacation time, payment of final wages and a discussion of your eligibility for continuing your health insurance pursuant to a Federal law known as COBRA.   It is important that you do not focus all of your attention, however, on what you will be receiving, rather, you must also pay close attention to what you will be giving up in exchange.

Sometimes, the stress of losing a job before you had planned on it makes it hard to look past the money being offered  However,  you must fully understand any provision where you are releasing the employer from liability. As a general statement, all severance agreements will include some level of release.  Basically, these provisions prevent you from taking certain actions.  Most prohibit an employee from in the future suing on anything related to the employee’s employment with the company.  Accordingly, if you think there was anything meriting a lawsuit about your employment up to and including your termination, by signing this agreement you  waive the right to file suit. Because this is a very serious waiver, it is advisable to seek legal counsel to get a comprehensive understanding of the situation and your options going forward.  A lawyer would be able to help you assess the validity of your claim and advise you on how to proceed.  If you wait to consult a lawyer until after you sign a severance agreement, you may discover that you have unintentionally given up valuable rights.  Accordingly, as tempting as an immediate severance payment may be, if you believe you have been wronged in such a way to merit a lawsuit, in order to protect your rights you need to fully understand what you are giving away in exchange for a payment.

Every agreement is different depending on the employer and the reasons for the separation.  As such there is no one size fits all legal advice for severance agreements because the provisions listed above are only two of a large number of potential components to a severance agreement and release.  Because it is critical that you understand what rights you are giving up and what you are gaining in return, it is important that you seek the counsel of an experienced attorney who can help you review and understand the document you’ve been given, as well as potentially negotiate with the employer to protect your interests.

If you have any questions, please contact us at 610-275-0700 or via email at main@highswartz.com.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

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