Whether you have been laid off, your employment has been terminated for another reason, or you have agreed to part ways with your employer, especially if you were in an executive position, there is a good chance you were presented with a severance agreement. A severance agreement normally has a provision that states that the employee has had the opportunity to consult with their own independent legal counsel before signing, and they should. It’s important to understand as the employee what you are agreeing to and what, if anything, restrictions will be imposed upon you.
Severance Pay. First and foremost, is the employer agreeing to pay you a sum certain as a severance package? If so, the agreed upon payment arrangement should be detailed in the agreement. If necessary, this is something that you as the employee can try to negotiate if you are looking to receive a higher amount of severance pay.
Confidentiality. The employer will most likely include a confidentiality provision in the agreement. The confidentiality provision can encompass both the terms of the agreement, as well as any proprietary information that the employee had possession/knowledge of as part of their employment. For example, information regarding business operations, customer lists, specific systems or formulas, strategies, these are all things that can be considered confidential. If the agreement contains a confidentiality provision, it will restrict you from sharing any of the information.
Non-Compete and Non-Solicitation. Most of the severance agreements that I have reviewed have either had specific non-competes and/or non-solicitation provisions, or referred to a non-compete and/or non-solicitation that was included within an employment agreement. These are provisions to be aware of upon hiring, as well as when reviewing a severance agreement. For example, I reviewed a severance agreement recently that referred to an employment agreement that was signed upon hiring and contained a non-solicitation clause. The clause prevents the employee from soliciting any of the company’s customers or employees for a period of two years after the employee is no longer employed by the company. It’s important to make sure that if a severance agreement contains one or both of these clauses, that it is consistent with your employment agreement (if you had one), and that you understand what the restrictions are once you leave. Towards this end, many severance agreements have a provision requiring that the employee disclose these restrictions to a new employer. It’s important to understand what you are agreeing to.
Non-Disparagement. The employer may include a non-disparagement clause, which limits what you as the employee can say about your employer once you leave the employment of the company. The goal with a non-disparagement clause is to keep you from saying anything negative about the company to others once you leave. However, it’s important to make sure that it’s not a one-way street and negotiate a non-disparagement clause that is mutual.
Release and Waiver. A severance agreement will typically include a release and waiver of any claims that the employee could assert against the employer up until the date that the agreement is signed. This will include any claims of discrimination, harassment, breach of contract, anything. Whenever I review a severance agreement I always make sure that the client understands what this means and discuss whether they have any claims against the employer and if so, whether they should agree to waive them. An employee cannot, however, relinquish their statutory right to file a charge with the Equal Employment Opportunity Commission (“EEOC”). Therefore, any promise not to file a charge or participate in an EEOC proceeding would be null and void as a matter of public policy.
When you are confronted with a severance agreement, it is important to know that most of the time, you can negotiate some of the terms. You do not have to blindly accept the terms that your employer has included in the severance agreement. Protect yourself and retain your own independent legal counsel to review the agreement and if necessary, negotiate an agreement that works best for you.
Disclaimer: The information contained in this post is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls and communications. Contacting us, however, does not create an attorney-client relationship.