Severance and Separation Agreements

Although it is not mandated by law, many companies ask employees to sign a separation or severance agreement when the employee is voluntarily leaving the company or has been terminated. A separation agreement is meant to protect the company from being sued by a former employee. These documents have legal implications and may prevent a person from taking legal actions against the employee for severance pay or wrongful termination.

As with any legal document, you should understand what you are signing before you put your pen to the paper. If you are faced with termination of your employment and asked to sign a document by the company that you are leaving, here are some things that might be a part of that document.

  • The reason that you are leaving your job

The document might state the terms under which you are separating from your employer. This would include termination, resignation, or layoff. Make sure that the reason stated is accurate.

  • A severance package

Your employer must provide you with all pay that is owed to you through your final day of work, and for your unused and accrued vacation days. Some employers also offer severance packages that may or may not include a monetary sum. However, severance packages are not legally required. If your employment contract stated you were meant to receive severance pay upon termination, then you should not sign something relieving the company of that contractual obligation. You should also remember that once you have signed the separation and severance agreement you will be forfeiting the right to sue at a later time for wrongful termination.

  • Tax and insurance considerations

Your agreement should state whether your benefits will be continuing and for how long, and it should detail tax information.

  • Confidentiality agreements

Confidentiality agreements are used by the employer to keep some things you may have handled in your job private, and to prevent you from sharing them once you have left the company. This would include things like company finances or trade secrets. Some exceptions to this confidentiality agreement should also be included though, as in for attorneys or spouses. The agreement may also be used to keep the terms specific to your termination private.

  • Non-Compete Agreements

Non-Compete provisions may be used to prevent a person from taking a job with a similar company, or a competitor of the company you are leaving. The restrictions placed on you from one of these agreements will be limited as to how much they can bind you. Limitations are usually based on location and time- so you might be able to take a job in a company some distance away from the one you worked for, and you cannot be prevented from taking a job with a competitor forever, but rather for a certain time period, such as one or two years. It is important to realize that signing an agreement such as this one might have serious implications for the next job you take.

  • Other provisions

A company might want you to sign a non-disparagement clause, preventing you from saying certain negative things about the company or your reason for leaving. The agreement might also include some practical items such as information about where to send your outstanding pay, or your need to return company property that you have in your possession.

What should I consider prior to signing a separation agreement or severance agreement?

You should be certain that you fully understand all of the implications of what you are signing, and what rights you are forfeiting by signing a separation agreement. If you think you might have a claim for discrimination or wrongful termination, you should not sign the agreement, and should seek advice from an attorney before you take any actions.

You also should look at the employment contract you signed when you were hired by the company. Whether or not you agree to a non-compete in your separation agreement will not matter as much if you already signed such an agreement as part of your employment contract. Still, if anything you signed seems unfair, you should make sure that the restrictions placed on you are within the company’s legal rights to impose.

If you have any doubts about whether you should be signing a separation or severance agreement, you should seek the advice of an employment attorney to ensure that your rights are being protected.

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At Stern Law, PLLC, we have compassionate and caring attorneys ready to work with you to find the best solution to your employment law related legal issues. Contact Stern Law, PLLC today at (844) 808-7529 for a free consolation with an experienced employment attorney.

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