Severance Agreement on the table: Now what?
Many of our callers are recently terminated employees seeking guidance. Thus, we are frequently asked about separation agreements that they have been asked to sign, and how to negotiate. Whatever reason for your dismissal, when presented with a Severance Agreement you may not fully understand, the right question is always, “Should I sign?
Here are some guidelines to consider before you sign away your rights by agreeing to an employer’s severance terms. Once you have signed an agreement, the damage is likely done. If possible, the first thing to say to an employer who has just presented you with a severance agreement, is “May I have time to consult an attorney?”.
1 General Release:
If you have been offered any severance pay, you are likely to be asked to sign a clause called a General Release, or Release of all Claims. It is almost always contained in any severance agreement. This is fairly standard language that will prevent you, the former employee, from ever bringing litigation against your soon-to-be former employer, even for acts that may be unknown to you at the time of separation. It is for this reason that you must be absolutely sure you are willing to accept the terms of the agreement you are signing. This is what you are giving your employer in exchange for any monies they are paying you over and above whatever they may owe you in regular wages and unpaid vacation time that has accrued. If you believe you may have any other claims, you should contact a lawyer to preserve those claims.
2 Preservation of Existing Claims:
- 2.1 Workers Compensation Claims. If you have suffered an on-the-job injury, and have not yet been compensated, then signing a General Release could prevent you from recovering any money as a result of that injury;
- 2.2 Retirement Benefits, such as Employee Pensions or 401 (k). While these plans, if vested, should be yours under the law, it is best to be certain that you are not waiving your right to collect benefits that have been promised to you and which may not be fully vested, but may be close
- 2.3 Other Claims: Third party suits and other actions against the employer, unrelated to your rights under employment laws, as well as suits in which you might otherwise have an interest of recovery.
3 Terms of Payment:
Payment of severance can either follow the employer’s payroll practices or be made in a lump sum. Either way, the employee will receive a net paycheck(s) reflecting deductions and withholding made during the course of employment. Ideally, the employee will be permitted to remain on the employer’s health plan for the time period that severance is paid.
4 Confidentiality Clause:
Another common clause that may appear in a Severance Agreement is the confidentiality clause. This may be included even in cases where the payment to the terminated employee is not a “premium” (fairly large) amount. This clause will generally prevent you from discussing or otherwise mentioning the separation agreement and/or its terms with anyone not involved in the agreement. Sometimes your spouse, your attorney or your tax preparer will be excluded from the clause, in order that you might discuss necessary details with them without penalty*.
Anyone engaging in any agreement that includes confidentiality, should check with a lawyer to find out if they are expected to refrain from such discussion, as to do so can negate the agreement and leave you in the position of having to return any monies paid to you by the employer. This clause is sometimes mutual, but if it is not, you have all the more reason to check with an attorney before signing, in order to fully understand the terms to which you will be bound once you have signed your name.
USE CAUTION: These prohibitions may include posting about settlements/payments on Facebook, Twitter, Instagram, Snapchat or other social media.
In some instances, an employer will ask for a “non disparagement” clause, which contains provisions asking essentially that you, the former employee, do not speak ill of your former employer. With a bit of tweaking, this can often be made “reciprocal” or mutual. This would mean that you would be likewise protected from your former employer’s interference with your efforts to find another job.
6 Neutral References:
A reference clause might be something that can be negotiated favorably for you by an attorney, particularly when the employer is merely downsizing. At the very least, you may be able to obtain a promise of a neutral reference, in which the employer promises to give only the dates of employment and a salary verification to future prospective employers.
7 Unemployment Compensation Claims:
You may wish to negotiate the official basis given as the reason for your termination in order to make sure that the reason is one which will permit you to collect unemployment benefits while searching for another job;
8 Health Insurance:
Losing one’s health plan coverage at termination of employment can be a frightening prospect, even with COBRA protections or the ACA. With the assistance of an attorney, you may be able to negotiate a thoughtful coordination between the coverage you had with the employer and healthcare security while seeking a new job.
Attempting to negotiate any of these terms on your own behalf, without the assistance of a lawyer, is not generally advisable, as many employees have little leverage within the few remaining days or weeks following their termination. So, if you find yourself in this position, and have questions about these or other terms of a proposed Separation Agreement, please feel free to contact Lazear Mack at 510-735-6316, tell us about it here.
Lazear Mack, LLP
Employment Law Attorneys
436 14th Street, Suite 1117