5 Things Every Employee Should Know Before Signing a Severance Agreement

Posted: April 1, 2020

If your employer presents you with a severance agreement, it is vital to ensure that you examine the agreement thoroughly. Employers will often procure severance agreements consisting of dense legal jargon, littered with clauses and provisions that may be potentially harmful to your career and may revoke your right to sue your employer for misconduct. Employees should not rely on HR personnel to be forthcoming about what binding provisions are included in these agreements, but at a minimum should conduct the relevant research to ensure the agreement does not waive essential rights. When presented with a severance agreement, it is important to consider the following: 1. Consider hiring an attorney. Before signing a severance agreement, you may consider reaching out to a number of legal professionals who will be able to offer insight to effectively navigate your termination with your employer. Many employees make the mistake of signing their severance agreement having assumed they do not have any leverage to modify the terms of the agreement. A skilled attorney will be able to negotiate a fair compensation and remove or modify any terms and conditions that are not favorable to you. According to Forbes editor Susan Adams, an attorney may be able to help you identify what proprietary information should be returned to an employer upon termination of employment, and may also be able to negotiate a provision for you to keep helpful proprietary information such as performance reviews. Your attorney will also help you to understand what rights you will be waiving if you sign the agreement and will also be able to identify whether the severance agreement is lawful. In 2016, an Atlanta-based company called BlueLinx Holdings was penalized for including a provision in employee severance agreements to waive their right to payment if they filed a Complaint with the Securities and Exchange Commission, in violation of a SEC rule prohibiting any actions to inhibit communication with the SEC about possible violations of securities laws. 2. Ensure you and your employer are on the same page about the timeframe to execute the agreement. Federal and state laws have been enacted to protect employees. For example, if you are over 40 years of age, you are entitled to at least 21 days to review your offer of a severance agreement pursuant to the Older Workers Benefit Protection Act (OWBPA). Employers who attempt to shorten these timeframes may be held accountable for violation of federal law. 3. Examine the implications for your benefit package. If you received a pension through your employer or had an active 401K account, make sure you know how these accounts will be impacted. If you have employer-sponsored insurance, be sure to know how long you will have access to your health care, dental, and vision benefits after termination of your employment with the company. Ensure that you will be entitled to continue to receive benefits under OWBPA. The severance agreement should also specify how your accruals of paid time off and sick time will be handled. In most cases, you should be compensated for accruals. 4. Insist upon modification of the agreement if the terms outlined therein are not favorable. Though unlikely, prospective employers may ask for a copy of the agreement. Because the agreement is an integral component of your personnel file, always ask that it be kept confidential. Ensure that it includes a provision for non-disparagement. In the event that a prospective employer calls to verify employment or request a reference, your employer will be legally bound to comply by this provision and will not be able to speak about you in a negative light. The severance agreement can also outline what information will be provided to potential future employers. 5. Be careful to abide by the terms of the agreement. If you breach the terms of your agreement, (i.e. are caught slandering your employer) you may be sued for breach of contract. The consequences of breaking a severance agreement can be severe. To learn more about negotiating a severance agreement, visit our Contact Page, or contact us directly by email at fglassner@veritasecc.com or by phone at 415-618-6060.