Legal Insider: Some Thoughts About Severance Agreements

Employees in Virginia are “at will,” which means they can be terminated at any time for any reason and severance is not typically required. When employment ends, however, an employer may offer a severance package to an employee in exchange for the employee’s waiver of rights.

However, employers, in the absence of an agreement or severance policy, generally have no obligation to provide employees severance pay. If severance pay is offered, an employer will require the employee to sign a severance agreement, agreeing to a number of terms.

A severance agreement is a contract between the employee and an employer that provides end-of-employment terms between the employer and the employee. Severance agreements are often offered in termination cases, but can also be offered to employees who are laid off or who are considering retirement.

Additionally, depending on the circumstances, a severance agreement may be offered to an employee who resigns or is terminated. A severance agreement must have something of value (also referred to as consideration) to which the employee is not already entitled to be enforceable.

Employers are generally required to provide an employee time to consider the severance agreement before signing. For instance, an employee usually has a 21-day consideration period to accept the severance agreement and at least a seven-day revocation period to revoke an employer’s severance agreement if the employee is 40 years or older.

Severance agreements usually contain far more than just compensation terms. They can include any number of agreements. Some examples of possible terms in a severance agreement follow:

• Reference information
• Financial terms, the timing of severance payments and potential tax information
• Continuation of health benefits
• Unemployment compensation benefits
• Waiver of claims against an employer (e.g. whistleblower, discrimination)
• Confidentiality (e.g. neither side will reveal the terms of the agreement)
• Non-disparagement (e.g. neither side will say negative things about the other)
• The possibility of re-employment
• Non-competition agreements
• Preservation of trade secrets

Severance agreements will always include a general release or waiver that prohibits the former employee from filing a lawsuit against his or her employer for wrongful termination. 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.

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