Severance agreements stipulate how employment will be terminated and what, if any, limitations the worker will have after they leave their role with the company. Not everyone is offered a severance agreement. Even fewer are aware that they can, and often should, be negotiated to extract as much as possible from the agreement.
The employment lawyers at the Katz Law Group in central Massachusetts have over 40 years of representing both sides in severance agreement issues, having helped both workers and companies protect their rights and advance their interests.
Common Terms in Severance Agreements
The contents of a severance agreement will depend largely on the type of role that the departing worker had at the company: More important employees with more responsibilities are likely to have stricter severance agreements than those that did not have decision-making roles. In fact, most lower-level employees will not be offered a severance agreement at all.
If one is offered, a severance agreement often includes:
- The amount of severance that the worker will receive
- A non-disclosure agreement
- A non-compete agreement, detailing what types of jobs the employee is prohibited from taking in the near future
- A non-solicitation agreement
- A release of claims provision, with the worker agreeing not to sue their soon-to-be former employer
- How the employer will respond to employment reference requests
The Importance of Negotiating Severance Agreements
Severance agreements are extremely important for both the worker and the company. From the worker's perspective, its terms can drastically impair their ability to get a new job in their field of expertise. From the company's perspective, it can prevent a former employee from using their insider's understanding of the company to help its competitors. These competing interests come to a head in the severance agreement. This is especially true for executive severance agreements, which can have large executive compensation amounts.
As employment lawyer David S. Katz explains, “When a company extends a severance agreement to a departing worker, if the worker accepts it without discussion then they are agreeing to what is essentially the company's wish list for the future. They are very likely signing up for some severe restrictions on their future employment, and are very likely being undercompensated for those restrictions in the severance package.”
Frequent Points of Negotiation
What to negotiate over in a severance agreement will depend on the worker's interests and plans for the future: A worker with no interest in continuing their career in the field that they are leaving will have a very different approach to negotiating their severance agreement than one who is intent on staying in the industry.
Some common points of negotiation include:
- How long the non-competition agreement will last
- The scope of the non-compete
- The size of the severance package given in exchange for the employment limitations
Employment Lawyers at the Katz Law Group in Central Massachusetts
Contrary to popular belief, severance packages can be negotiated to protect a worker's rights and future. Call the employment attorneys at the Katz Law Group for help negotiating yours at (508) 480-8202 or contact them online.
