If you are asked to sign a severance agreement, you might have some questions about what the various clauses and provisions mean. Typically, a severance agreement will explain what you are getting -- your severance package -- and what you are giving in exchange, such as an agreement not to sue, not to compete with your former employer, or not to discuss the terms of the deal. This article explains some common severance agreement terms.
What's In the Severance Package?
Your agreement should explain exactly what you are getting for signing. This part of the agreement often includes terms like these:
- The money. The agreement should state how much you will be paid in severance and how it will be paid (for example, in one lump sum or in installments).
- Benefits. If your former employer will pay to continue your health or other benefits, the agreement should say so. Employees who lose their jobs are entitled to continue their health insurance, but they also have to foot the whole bill; some employers offer to pay for benefits as part of a severance package. (For more information on your right to continue your health insurance, see Continuing Benefits.)
- Any other items you will receive. For example, your employer might agree to let you keep a company laptop or vehicle, or might agree to give you stock options.
- Outplacement services. Some employers provide employees with assistance finding a new job.
Employee Promises In Exchange
As part of the agreement, you will undoubtedly be asked to make certain promises or give up certain rights. What you're asked to agree to will depend on your situation, but look for terms like these:
- A release. A release (also called a waiver) is an agreement to give up your right to sue the employer. Often, this is what the employer wants from you in return for paying severance. If you're asked to sign a release, think about it carefully. If you have any questions, or you believe you may have legal claims against your employer, speak to a lawyer before signing.
- A confidentiality clause. Your employer may want to make sure that other employees don't find out how much you've been paid. In this situation, the employer may ask you to agree to a confidentiality provision, by which you promise not to reveal the terms of the severance arrangement.
- A nondisparagement provision. In a nondisparagement clause, you agree not to say bad things about the employer. (This type of clause may also be mutual, which means the employer also agrees not to say bad things about you.) These are unusual unless the employee has already filed a lawsuit and there's a lot of bad blood between the parties.
- A noncompete and/or nonsolicitation clause. Especially if you were in on company trade secrets or held a high-level position, your employer may ask you to agree not to compete with it or take its employees to work with you. Noncompete clauses are not legal in every state; states that allow them often restrict how long they can last or how large an area they can cover. This is another term you'll want to discuss with a lawyer.
- An integration clause. This provision states that the written agreement is the entire contract between the parties. If you were promised anything that doesn't appear in the final written agreement, an integration clause could prevent you from relying on that promise later. In this situation, you shouldn't sign the agreement until everything you think is part of the deal is actually written into the contract.
Get Legal Help
As you can see, severance agreements can get complicated. If you have any questions about an agreement you are asked to sign, and especially if you are asked to sign a release, you should speak to an employment lawyer. If you have valid claims against your employer, a lawyer can try to negotiate a better deal.
