Serving Employees And Employers

Severance Agreements Require Careful Representation

Last updated on February 22, 2021

Being terminated or laid off from work is an emotionally daunting experience that often leaves the employee financially unprotected. In some situations, an employee may be in a position to negotiate a severance agreement. Although severance packages do not erase the reality of being suddenly or unexpectedly jobless, they certainly help ease the employee’s financial worries while he looks for a new job.

Read on to learn about the basics of severance.

What is a severance agreement?

A severance agreement is a binding contract between the employee and his employer by which the employer typically offers the departing employee a sum of money in exchange for a release of claims. By signing a release, an employee discharges the employer from any liability related to the employee’s employment with the company, including any claims he may have for harassment, discrimination, or retaliation under applicable state and federal laws. The amount of the severance varies but is usually tied to the employee’s years of service with the company.

Is severance pay required?

With limited exceptions, such as an employer’s policy requiring severance pay or contracts that provide for such pay, an employer is not obligated by law to offer severance pay to a departing employee.

How do severance agreements benefit employers and employees?

Many employers today provide severance packages of their own accord for a number of reasons, including to avoid lawsuits. Thus, a key component of the severance agreement is the release.

Severance agreements are an ideal option for employees who desire to move on with their lives and do not want to deal with the stress that comes with initiating a lawsuit. Beyond the monetary aspect, a severance package may also be negotiated to provide the employee with medical benefits, pension plan qualification, outplacement assistance, a favorable letter of reference or a promise not to contest unemployment benefits (among other incentives). Depending on the circumstances and the needs of the employee, the agreement can also be made to reflect that the separation was other than a termination for cause, including a voluntary resignation, or a layoff due to a reorganization of the company.

How We Can Help

We review, draft and negotiate severance agreements for both employers and employees. We also counsel employees and employers regarding accepting/offering severance packages balanced against the potential of a lawsuit. To ensure that you receive optimal results, contact the DeVito Law Group today.