Leaving a job is always a stressful time for employees. Regardless of whether the employee left on their own terms, there are many unknowns that an employee can face. An employer may offer a severance package to a departing employee to help ease the transition process and reduce the stress of leaving a job.
Generally, a severance package is a payment made to an employee by the employer in exchange for signing a written promise that the employee will not pursue legal action against the company. This written promise is commonly called a severance agreement. Unless a severance package has been previously agreed to in writing in an employment contract, the employer is not required to offer a severance package.
While an employee is not required to sign a severance agreement, being offered one naturally raises many questions. What exactly do you agree to? What are the implications? How much is offered, and how much does the company determine that? Is that amount negotiable? This article will look deeper into severance packages and what they may mean for you.
As mentioned above, a severance package is a payment made to an employee for signing a contract. This payment is made in addition to any owed wages, such as your final paycheck and any accrued paid time off (if applicable). The severance agreement, the contract that an employee signs, often has many different provisions. The primary purpose of a severance agreement is that the employee is waiving, or “releasing”, any and all claims that they may have against the employer. This means that if an employee signs a severance agreement, they cannot pursue legal action against the company for any issues that may have occurred during their employment. Depending on the language of certain severance agreements, this may include claims that the employee did not even know they had. For example, suppose an employee signs a severance agreement and later learns that the company was engaging in an unlawful employment law practice. In that case, they may not be able to pursue any sort of legal action.
Other typical provisions a severance agreement may include are confidentiality clauses and non-disparagement clauses. A confidentiality clause generally states that an employee cannot discuss the terms of the severance agreement with third parties. A non-disparagement clause states that employees are prohibited from saying negative things about the company, especially on social media. Depending on the specific language of the agreement, it is possible that if the company discovers you have violated either the confidentiality clause or the non-disparagement, the company may be entitled to recover monetary damages from you.
But, in exchange for releasing your claims and promising not to discuss the severance or speak negatively about the company, the employee is entitled to some additional payment. Because a company is not required by law to offer a severance agreement, there is no single standard for how that payment is determined. If you and your employer have agreed in writing in an employment contract that you would receive a severance package, the employment contract may layout how the severance amount is calculated. Otherwise, companies may offer a certain number of weeks’ worth of pay as severance. In some cases, the company may offer a set number of weeks’ worth of pay, i.e., two weeks’ worth of pay, multiplied by the number of years that an employee worked for a company. For example, if you worked at your company for ten years, the company may offer 20 weeks’ worth of pay (two weeks x 10 years of service). Ultimately, the amount that the company offers is entirely within their discretion.
In some instances, the company may be willing to negotiate the amount of severance that is offered. This can either be done individually or with the assistance of an employment attorney. Of course, the company is usually not required to negotiate the severance amount unless there has been a previously agreed to calculation in an employment contract that was not followed. If you are offered a severance agreement and are unsure of what to do, or concerned about any of the provisions, it is best to speak to an employment attorney immediately. Severance agreements may often have deadlines for when they can be accepted. In some cases, once a severance agreement is signed, an employee may have a very limited amount of time to revoke their acceptance of the severance. It is always good to have an employment attorney review the severance to ensure that it has been properly drafted and is not too broad or includes provisions that are illegal.
Finally, it is solely within your discretion whether to sign a severance agreement or not. While an employment attorney may be able to advise you as to the terms of the severance agreement and potentially discuss any issues you had during your employment, at the end of the day, it is your choice whether to accept it or not. The company cannot, in any way, pressure you or coerce you to sign a severance agreement. If you feel this may be happening, consult with an employment attorney right away to discuss your options.