18 Nov Signing a severance agreement
Terminated employees often have questions about signing a severance agreement. Specifically, they want to know whether they should sign a severance agreement that their former employer offers them. Unfortunately, this is can be a complicated question. Before deciding to sign a severance agreement, you need to consider a number of factors, including the terms of the agreement, your situation, and your goals. You should also strongly considering consulting with an employment attorney to help you navigate this important decision.
What is the effect of signing a severance agreement?
A severance agreement is a contract which sets the terms of an employee’s severance from an employer. Often, an employer will propose a severance agreement to an employee it has terminated. The specifics differ, but severance agreements usually center on two important terms. First, the employer will agree to pay the employee some chunk of money. Second, the employee will agree to waive any claims she might have against the employer. There are all sorts of other provisions that might be in a severance agreement, but those are the two most common and important.
In essence, you’re giving up your right to sue your former employer in exchange for money. For example, suppose your employer fired you for complaining about discrimination or harassment. That’s unlawful retaliation and you could sue your employer for retaliating against you. But if you signed an agreement waiving your right to sue, that could prevent you from being able to pursue your case. Accordingly, you may want to think twice about signing such an agreement if you think you may have claims against your former employer.
Other things to look out for in severance agreements
While a waiver of claims is generally the most important part of a severance agreement, there are other potential terms to look out for. For example, many proposed agreements contain non-disclosure agreements or NDAs for short. Individual NDAs differ, but generally, they require parties to keep something secret. They can also prevent you from saying anything negative about your former employer.
Another common term in severance agreements are arbitration clauses, in which you agree to submit any claims to arbitration and waive any right to sue in court. Arbitration is essentially a private court system. While an arbitration agreement is not a waiver of claims, arbitration is generally more friendly to employers than employees. As such, agreeing to arbitration is a big decision that you should not take lightly.
Factors to consider when presented with a severance agreement
Obviously, you should be skeptical of anything your former employer offers you. Chances are, they’re not offering you severance pay out of the goodness of their heart. Instead, they’re doing it because they believe they’ll be better off with such an agreement in place. But that doesn’t mean that you should never under any circumstances sign a severance agreement. There may be situations in which it makes sense to sign one.
There’s an endless number of a factors that might go in to that decision. For example, what are the terms? If your employer offers you a very large sum in severance pay, maybe it’s worth it. How badly do you need the money? If you desperately need the money, the conditions of accepting the severance pay may be less severe than foregoing that severance pay. Are you aware of any potential claims you might have against the employer? If you believe you have a claim for harassment or discrimination, you probably don’t want to give up those claims for a small amount of money. These are only a few of the factors to consider.
The role of an attorney in a severance agreement
If your employer has recently terminated you, the best thing you can do is contact an employment attorney. While you’ll need to make the final decision regarding signing a severance agreement, an attorney can be helpful in a number of ways.
First, an attorney can tell you what’s in the agreement. Employers often draft agreements to be as complicated as possible. They hope that you’ll sign without understanding what you’re agreeing to. If you don’t know what you’re agreeing to, you can’t make an informed decision. An attorney can help you understand exactly what’s in there. Once you fully understand what’s in the agreement, you can make the decision that is best for you and your family.
Second, an attorney can identify any claims you might have. Because signing a severance agreement typically means waiving your claims, it’s important to know what claims you have. If you’ve experienced severe sexual harassment, you probably know that you have a claim. But many claims are less obvious, some can be quite technical. If you’re not an attorney, you may have potential claims of which you’re not aware. An employment attorney can evaluate your situation and determine what, if any, claims you might have. Once you’ve identified potential claims, you can determine whether your former employer is offering fair value for the waiver of those claims.
Finally, an attorney can help you negotiate a better severance agreement. Usually, the employer will send a proposed agreement and give you a sharp deadline to sign it. Obviously, the employer is going to draft an agreement that’s advantageous to them. An attorney may be able negotiate a more fair agreement. Of course, you can try negotiating with the employer yourself. But an experienced employment attorney will likely get better results.
So what should I do?
Unfortunately, there’s not a one size fits all answer. While consulting an attorney is an important part of the process, it’s ultimately a decision you’ll need to make for yourself. The most important thing is that you understand what you’re agreeing to and what you’re giving up by signing. Once you understand what’s in the agreement, you can weigh the factors and do what’s best for you and your family.
If you need an employment attorney to review or help negotiate a severance agreement, contact the Khadder Law Firm today.