Severance Agreements Can Be a Windfall—But Also a Minefield
Always Have Your Severance Agreement Reviewed by an Attorney
Being laid off can be devastating—but a good severance package can take the edge off.
Severance packages continue the relationship between employer and employee for a period of time beyond the termination of employment—for instance, by extending your benefits and giving you severance pay.
But they can also impose certain terms, on both employer and employee. And those terms are often more restrictive to the employee.
That’s why it’s crucial to have an experienced employment lawyer review your severance agreement before you sign it—no matter what. Here are nine pitfalls your attorney can help you avoid:
- Less money than you deserve
Your employer may be under-paying—and a lawyer can help you negotiate for more.
- No other earned benefits
Are you owed earned sick days or vacation time? Make sure your employer includes those in its agreement.
- No continued health insurance
One of the most frightening things about losing your job is losing your health insurance along with it. Sure, you can buy coverage under COBRA—but that’s often very expensive.
As an alternative, you may be able to negotiate staying on your company insurance for a time.
- Non-compete agreements
These say that you can’t work for a competitor for a limited time, but they can be unreasonably restrictive—essentially cutting you off from taking a job with other companies in your industry, within your area, for a year or longer.
This can seriously hamper your job search.
- Non-solicitation agreements
Your employer may ask you to sign an agreement that you can’t solicit the same clients or customers that your current employer works with. A good lawyer can review these terms and make sure they don’t hamstring your next steps.
- Arbitration clauses
This clause takes away your right to sue your employer in court—and if you’re already in the middle of a lawsuit over your dismissal, this can cut it off at the knees.
- Non-disparagement clauses
Most severance agreements contain a clause saying that you can’t bad-mouth your employer once you’re let go. An attorney can push for a tit-for-tat agreement where your employer also isn’t allowed to bad-mouth you.
They can also negotiate how your references are given and what information will be provided to your new potential employer.
- Proprietary information
Many employers include wording in severance agreements prohibiting you from using proprietary information in your future employment.
This might sound reasonable—except that this wording may even includes things you need for your own career, such as performance evaluations.
An attorney can make sure you’re allowed to use certain information, especially pertaining to your performance, that can help in your job search.
- Confidentiality agreements
Your employer may include wording saying the terms of the severance agreement have to stay confidential.
Again, that sounds reasonable—except when that wording prohibits you from discussing the agreement with your attorney, accountant, tax preparer, or even your own family.
An attorney can help negotiate for a less restrictive confidentiality clause.
Got a severance agreement? Talk to a lawyer
If you have a severance agreement, it’s crucial to talk to an experienced employment lawyer before you sign. They can help you avoid the pitfalls—and negotiate better terms if needed.
The information provided here does not constitute legal advice. It is intended for general purposes only. If you have questions about a specific legal issue, you should speak to an attorney.