Should I Sign My Severance Agreement?
Being handed a severance agreement can be overwhelming. You may be dealing with an unexpected termination, worrying about your next job, and trying to understand several pages of legal language at the same time.
Before you sign, it is important to understand one thing: a severance agreement is a contract. In exchange for severance pay or other benefits, your employer will usually ask you to agree to certain terms and give up certain legal rights.
That is why having an employment attorney review the agreement before you sign can be important.
What Is a Severance Agreement?
A severance agreement, sometimes called a separation agreement, is a contract between an employer and an employee at the end of the employment relationship.
The employer may offer money, continued benefits, or other compensation in exchange for the employee signing the agreement. In return, the employee is often asked to release legal claims against the employer.
That release can be significant. Depending on the agreement, you may be giving up the ability to bring claims involving discrimination, retaliation, wrongful termination, or other employment issues.
Once an agreement is signed and becomes effective, your options may become much more limited. This is one reason it is usually better to have the agreement reviewed before signing it.
Do I Have to Sign a Severance Agreement?
No. A severance agreement is generally an offer that you can accept, reject, or sometimes negotiate.
Before making that decision, ask yourself:
What am I receiving for signing?
What rights am I giving up?
Do I have potential legal claims against my employer?
Are there terms in the agreement that could affect my next job?
Could the severance package be negotiated?
You do not have to assume that the first agreement presented to you is the only agreement your employer will consider.
Can a Severance Agreement Be Negotiated?
Yes. Depending on the circumstances, many terms of a severance agreement may be negotiable.
An employment attorney may review your termination and employment history to determine whether there is a basis for requesting better terms.
Negotiations may involve:
Additional severance pay
The timing or structure of payments
Bonuses or commissions
Stock, equity, or other compensation
Continued health insurance or payment toward COBRA
Confidentiality provisions
Non-disparagement provisions
Non-compete or non-solicitation restrictions
References or how the separation will be described
Other terms that may affect your future employment
The strength of a negotiation often depends on the facts surrounding your employment and termination.
Could I Be Giving Up an Employment Claim?
Possibly.
Severance agreements commonly contain a release of claims. This is language stating that, in exchange for the severance package, you agree not to pursue certain claims against your employer.
Before signing, it can be important to determine whether you may have claims involving:
Workplace discrimination
Sexual harassment
Retaliation
Wrongful termination
Disability discrimination
Pregnancy discrimination
Age discrimination
Unpaid wages, bonuses, or commissions
Employment contracts
Other unlawful workplace conduct
A termination that seems unfair is not automatically illegal. However, an employment attorney can review what happened and determine whether there are potential legal issues that should be considered before you release your rights.
What Should I Look for in a Severance Agreement?
You should understand every provision before signing. Some of the most important terms to review include:
1. The Release of Claims
Determine exactly which legal claims you are agreeing to release. A broad release can cover much more than the termination itself.
2. Severance Pay
Look at how much you are being offered, when it will be paid, and whether any portion of the money is something you may already be entitled to receive.
3. Bonuses and Commissions
If you earned commissions, bonuses, or other incentive compensation before your termination, determine how the agreement treats that compensation.
4. Confidentiality and Non-Disparagement
These provisions may restrict what you can say about the company, your employment, or the agreement itself. Some overly broad restrictions may raise legal concerns depending on the employee and circumstances.
5. Non-Compete and Non-Solicitation Restrictions
Review any language that could limit where you can work, which customers you may contact, or whether you can recruit former coworkers after leaving.
6. Health Insurance and Benefits
Determine when your existing benefits end and whether the employer is offering continued coverage or assistance with COBRA premiums.
7. Your Deadline to Sign
Do not ignore the deadline in the agreement. Give yourself enough time to understand what you are signing and seek legal advice if necessary.
Can My Employer Stop Me From Filing an EEOC Charge?
A severance agreement cannot lawfully prevent you from filing a charge with the Equal Employment Opportunity Commission or participating in an EEOC investigation.
However, signing a valid release may still affect your ability to personally recover money or pursue certain claims against your employer. The distinction can be complicated, which is another reason to understand the agreement before signing it.
Why Have an Employment Attorney Review the Agreement?
A severance agreement is written to protect the employer's interests. Before you sign it, you should understand how it affects yours.
An employment attorney can:
Explain the agreement in plain language
Identify rights you may be giving up
Evaluate potential employment law claims
Review your termination and employment history
Identify unfavorable or unusual provisions
Determine whether the severance offer may be negotiable
Draft a letter to your employer or its attorney
Negotiate compensation and other terms on your behalf
Even when there is no reason to pursue a lawsuit, negotiating the agreement itself may result in terms that better protect you as you move forward.
Do Not Wait Until After You Sign
The best time to have a severance agreement reviewed is before you sign it.
Once an agreement becomes effective, you may have already released valuable rights or accepted restrictions that could have been addressed during negotiations.
If you have received a severance or separation agreement, take the time to understand what it says, what you are receiving, and what you are giving up.
Have You Received a Severance Agreement?
Vanderpool Law Firm reviews and negotiates severance and separation agreements for employees in Texas and New Mexico. We can review your agreement, explain its terms, evaluate potential employment claims, and determine whether there may be an opportunity to negotiate better compensation or more favorable terms.
Contact Vanderpool Law Firm to request a confidential severance agreement review and discuss your options before signing.
This article provides general information and is not legal advice. Employment laws and individual circumstances vary.