What Terms are Generally Found in a Severance Package?

Employees departing from a job (voluntarily or involuntarily) may
receive a severance package. Why? Because the Company has decided that it
is in the Company’s best interest to have the employee sign a document with
certain specific terms that are protective to the employer. Some Company’s have
a severance “policy” while others believe offering employees
severance makes good business sense. Regarding the latter, many Company’s feel
that in providing employees severance (sometimes even a minimal amount of pay),
the employer is generally obtaining peace of mind that the former employer will
not raise any claims in a government agency or in court against the employer.

So what terms are generally found in a severance agreement? Below
are just a few of the many terms that can appear:

* Consideration – the amount the employee is to be paid in
severance, the payment structure and possibly payment of employee’s health
insurance or COBRA;

* General Release of Claims – employee to release the
company (as well as its directors, officers, parent, subsidiary, etc,) from any
claims from the beginning of the world until the date of signature;

* Confidentiality – employee’s agreement to keep the terms
of the severance offer and the circumstances of their departure confidential;

* Non-Disparagement – employee’s agreement not to disparage
or say anything bad (verbally or on social media) about the employer (officers,
directors, parent subsidiary, etc.);

* No Re-Hire – employee agrees not to seek employment with
the employer (parent, subsidiary, etc,) at a later date;

* Cooperation – employee agrees to cooperate with the
employer should employer need transition assistance or if the employee has
information the employer needs at a later date;

* Non-Compete / Non-Solicitation – employer restates any
continuing obligation the employee has previously agreed to by written document
or establishes new terms that the employee is being asked to agree to in
conjunction with the signing of the severance agreement;

* Choice of Law/ Arbitration – employer sets out what Court
and what law applies to the agreement and/or the requirement that the employee
arbitrate any claims that may be raised;

* Effective Date of Agreement – the agreement will set forth the time period the employee has to review the agreement and whether the employee can revoke their signature;

* Right to Consult with Counsel – the agreement should state that the employee has a right to have the document reviewed with an attorney prior to signing the agreement. A severance package is an enforceable legal document. Any employee who receives a severance package should have the agreement reviewed prior to signature so as to understand the terms within, if there is any opportunity to increase the offer and what, if any, concerns the attorney sees regarding the language in the agreement and the basis for the employee’s termination / resignation.

Click here to schedule a consultation with Sheree Donath to have your severance package reviewed or learn more about your rights and options as an employee or former employee.