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Severance Packages & What You Need to Know Before You Sign

Severance packages are not as straightforward as you would think. In this post, we’d like to examine some of the key issues concerning your compensation upon separation from a company. It’s important to know exactly what you’re signing so that you’ll know your rights if you leave the company and receive a severance package which includes a release agreement.

What Exactly Are Severance Packages?

Sometimes, companies will entice high potential employees to work for them by including a lucrative severance package in their employment agreements.  Companies also offer severance packages to certain employees when they leave the companies either voluntarily or involuntarily.

What is a severance package? Basically, an employment agreement that provides compensation and other benefits after an employee’s employment terminates and includes a release agreement in which the employee waives all employment-related claims against the company and agrees not to sue the company.

Severance agreements are attractive to employees because these agreements provide for a lump sum of cash or cash for a specified number of pay periods, and additional benefits such as health insurance for a defined time period. Employers like severance agreements because employees waive all employment-related claims to receive the benefits so the companies receive the finality of knowing that the employees will not sue for employment claims.

Possible Areas of Confusion Regarding Severance Packages

We want to draw your attention to some of the many possible stumbling blocks you might have with your severance package.

  • The amount of money the company offers in a severance package may be too low. Oftentimes, the company will increase the severance payments if the employee negotiates the amount.  You should consider the initial severance package the company’s opening offer.  Almost every company will sweeten its initial severance offer.
  • The agreement will likely involve you signing away your right to bring employment-related claims against the company. You will want to understand exactly what employment claims you are waiving and have your employment lawyer review any severance agreement release if you have any concerns.
  • Many severance agreements also have confidentiality and non-disparagement provisions. These provisions mean that you cannot publicize the severance agreements and payment amounts in any manner (including on social media platforms).
  • Another provision that may be problematic is a non-competition clause.  These clauses prohibit employees from working in certain jobs in certain locations.  These clauses are not as common as they were in the past.  You should definitely seek an employment attorney’s advice before you sign a severance agreement that contains a noncompete clause.

These are just a few of the important items you should look for when you review any severance agreement. Again, you can always have an employment attorney review any severance agreement before you sign it.

Do You Need a Lawyer With You to Sign This?

Yes, you should review this with an attorney because your severance agreement is a binding legal document that controls your relationship with the company once your employment there ends.

Rowdy Meeks Legal Group LLC Severance Agreement Review

Rowdy Meeks Legal Group LLC has reviewed severance agreements from employers across the United States. The Firm also reviews mortgage loan officer agreements and compensation plans to make sure that loan officers receive all compensation including commissions due them.

Please contact us today if you have questions about a severance agreement, loan officer agreement, or any other employment agreement.