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Legal Insider: Severance Agreements

This is a sponsored column by attorneys John Berry and Kimberly Berry of Berry & Berry, PLLC, an employment and labor law firm located in Northern Virginia that specializes in federal employee, security clearance, retirement and private sector employee matters.

By Kimberly H. Berry, Esq.

Severance agreements are agreements that compensate an employee in exchange for their departure from an employment position.

Most employees are considered “at will,” which means they can resign and/or be terminated at any time. When employment ends, an employer may offer a severance package to an employee in exchange for the employee’s waiver of right to sue.

However, employers, in the absence of an employment contract, generally have no obligation to provide employees severance pay. If severance pay is offered, an employer will offer the employee a Severance Agreement.

Severance Agreements

A Severance Agreement is a contract between an employee and an employer that specifies the terms of an employment termination. Severance Agreements are also offered to employees who are laid off or facing retirement.

In addition, depending on the circumstances, a Severance Agreement may be offered to an employee who resigns or is terminated. The Severance Agreement must have consideration — i.e., something of value to which the employee is not already entitled.

Employers are usually required to provide an employee time to consider the Severance Agreement before signing. An employee typically has a 21-day consideration period to accept an employer’s Severance Agreement unless the employee is over 40 years of age.

The Older Workers Benefit Protection Act (OWBPA) requires that an employer provide employees over 40 years of age with a 45-day consideration period and at least a 7-day revocation period.

There are various ways that Severance Agreements are used:

  • An employee is terminated and the employer then offers a Severance Agreement;
  • An employee has been terminated, no Severance Agreement was proposed by the employer but the employee approaches the employer seeking one; or
  • An employee wants to resign and seeks to negotiate severance.

Some of the issues to consider in a Settlement Agreement may include, but are not limited to the following:

  • Financial terms
  • Tax consequences and timing of severance payments
  • Confidentiality
  • Continuation of employment benefits
  • Rights to unemployment compensation
  • Release of Claims
  • Non-Disparagement
  • Re-employment possibilities
  • Scope of non-competition
  • Preservation of trade secrets
  • References
  • Recommendation letters
  • Applicable law
  • Consequences of violating the Severance Agreement

Severance Agreements often include a General Release (Waiver) that stipulates the employee cannot sue his or her employer for wrongful termination or attempt to seek unemployment benefits.

Before an employee signs a Severance Agreement, he or she should consult with an attorney to discuss the rights that he or she may be waiving and the terms of the Severance Agreement.

Conclusion

When facing a severance agreement it can be important to have the assistance and advice of counsel. If you need assistance with such an agreement or other employment issue, please contact our office at 703-668-0070 or at www.berrylegal.com to schedule a consultation. Please also visit and like us on our Facebook page.

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