Wednesday Worklaw Alert: Should I Sign My Severance Agreement?

First of all, what is a severance agreement? A severance agreement is a contract between you and your employer that outlines each of your responsibilities and rights when you are terminated from your job. Sometimes, the wording of severance agreements can benefit the employer at the cost of the employee. An employment lawyer can assist in reviewing your severance agreement and, if necessary, negotiate the terms with your employer to ensure you know your rights and are maximizing your benefits. 

What should I look for in a severance agreement? 

General release of all claims 

Look for a general release at the end of a severance package – it usually starts by saying something like, “You agree to release any and all claims….”  Some releases are “limited,” or are for only particular claims, but most are for all possible claims, and you will no longer be able to hold the company responsible for any claim or prior grievance you may have against them. Make sure you do not sign an agreement that takes away your ability to file claims, such as whistleblower or workers’ compensation.  

Continuing health coverage  

Often, severance agreements will have provisions for “bridge the gap” health insurance, or COBRA. You want to be certain there will be no gap in your insurance coverage and if there is no mention of health insurance continuation or any mention of termination of health insurance immediately, you absolutely do not want to sign until you consult with a lawyer.

References 

Many employers will offer to provide references in a severance pay agreement. Be wary of severance agreements that do not offer to provide references, especially if the company you’re working for is simply reducing their workforce. Ensure your employer is contractually bound to provide references to future employers. 

Mutual non-disparagement 

This is another common clause that you need to watch out for. If you sign, you could be barred from ever speaking “ill” of the company or disparaging them in any way; it sounds simple enough, but the definition of “disparagement” is largely a subjective one. If asked to sign a non-disparagement agreement, it’s important that you work with a severance agreement lawyer to ensure it is mutual versus one sided.  

Severance amount 

Review the total package and ensure that it is sufficient to sustain you until you are able to find new employment. Sometimes, employers provide a low amount with the expectation that employees will negotiate it.  

Reason for termination 

Typically, a severance agreement will include the reason for your termination. If possible, the severance agreement should list a reason for termination that will not automatically exclude you from being able to file for unemployment benefits.

Non-compete clause 

Check the agreement for any non-compete clauses that are more restrictive than any you signed at the start of your employment.  

Mutual releases 

Ensure that if you are releasing your employer, your employer is also releasing you.  

Seek Legal Assistance Today 

If you would like your severance agreement reviewed or negotiated, seek legal assistance from the Law Office of Christopher Q. Davis, located in New York City and Livingston, NJ. Contact us today at (646) 430-7930 to schedule a free case evaluation and receive experienced legal counsel.