Severance agreements are contracts between an employer and a departing employee that formalize the terms of the separation- and beyond. While people are generally aware that employers sometimes offer a severance agreement, there are some important facts that employees should know in the event that they are presented with one and asked to sign it.
Like most contracts, severance agreements are subject to negotiation. Employees often have leverage to bring employers to the table. This may be the result of potential legal claims against the employer, such as a claim for discrimination, various forms of retaliation or whistleblower claims, or a Massachusetts Wage Act violation. Employees may also have leverage as a result of information that the employer wants the employee to keep confidential, or in order to prevent the employee from making disparaging statements regarding the employer. Thus, employers typically want the employee to sign the release of claims in order to provide finality, and the comfort of knowing that the employee will not sue in the future. Employers will also typically want the employee to agree to confidentiality, and a provision requiring the employee not to disparage the employer (including other people or entities relating to, or affiliated with the employer). Based upon the above, it is often worth it to the employer to give some concessions to the employee, in order to make sure the agreement gets signed.
In addition to negotiating the monetary terms (sometimes, this includes considerations relating to equity/shares of stock), employees should consider negotiating non-monetary terms. For example, what is the former employer going to say if/when a prospective/new employer calls for a reference?
Many employees sign severance agreements without fully understanding the terms. This is risky, since these contracts often come with obligations that employees need to honor even after they leave the employer. These obligations may limit an employee’s future work activities, requirements that an employee “cooperate” with their former employer, and what they can disclose about the former employer.
In order to enter into the best possible severance agreement, it is important to review a proposed severance agreement with an experienced employment attorney who can help to interpret the agreement and advise on beneficial changes. In addition, it can be advantageous to have someone else negotiate on your behalf.
At Bennett & Belfort, P.C. our lawyers frequently review and negotiate severance agreements across all different types of industries and job types. Some recent severance agreements we have reviewed include the following industries: biotechnology; pharmaceutical; robotics; internet security; thermal imaging and infrared technology; technology; health care; behavioral health; engineering; construction; architectural; entertainment; education; medical devices; medicine; dentistry; legal; financial services; software; hardware; restaurant, food service and various service industries; beauty supply; hospitality; senior living/long-term care; automotive; real estate; recreational, including golf; all types of sales and marketing positions; and human resources. If you are in need of a severance agreement review, please feel free to contact us for an intake to see if we can help you.