Have you been offered a severance agreement? Well, congratulations for getting something out of a bad situation, and condolences on the bad situation. What does it all mean?
Severance is offered by some companies as a matter of policy; in many of those cases the severance policy is made according to a written plan with specific rules. That means that the severance plan requires that you be paid based on some formula spelled out in the plan, perhaps a week for every year of service plus accrued but unused vacation. Most of the plans I’ve seen also say the severance will be paid only if you sign an agreement in which you release all claims, agree to keep the agreement’s contents confidential, and agree not to bad-mouth the company.
These kinds of agreements are almost always a condition of the severance offered on an ad hoc basis to someone whose employment has been terminated. Other frequently seen provisions include renewals of the non-disclosure agreements, provision of career placement services, and the ending of all fringe benefits, except, sometimes, health insurance.
To obtain an effective release from some claims of discrimination, the severance agreement must have certain provisions. For example, to release age discrimination claims, an employee must be given a certain time period to consider the agreement, plus a seven-day period to revoke his or her agreement, under the Older Workers Benefits Protection Act.
To release Family and Medical Leave Act claims, the Department of Labor needs to be involved.
The EEOC offers a severance agreement primer at its website, you can find it here.
What’s your next step?
If you are presented with a severance agreement, you need to determine whether the value of what the company is offering is more than the value of your released claims. In addition, if the agreement is not being offered as a part of an employment benefit plan, then there may be room to negotiate a better package, whether “better” means a higher financial payout, or an offer of something less tangible, such as a positive recommendation. Experienced counsel may be of help in figuring out your options.