What Is a Severance Agreement?

When an employee is let go from their job, sometimes they receive a severance package upon their departure. This is usually the case if the employee is being enticed to leave the company or if the company wants to put a limit on the employee’s future right to file claims against the business

A generous severance package may be viewed as a well-deserved reward, but the exchange may still serve as legal protection for the employer. Therefore, employees who are offered a severance package are wise to read the terms and conditions before signing anything.

No matter the reason for the employee’s departure, the employer must pay the employee for all hours worked and services provided in accordance with their agreement. Any compensation package offered in exchange for signing a severance agreement must be independent of wages earned by the employee and owed by the employer.

What Are the Basic Components of a Severance Agreement?

There are no laws governing how much or what types of offers should be made to departing employees. Usually, an employer bases severance packages on the length of employment with the company. For instance, a company initiating a layoff of several employees might make a severance offer equal to one week’s pay for each year of employment with the firm.

Sometimes, a severance agreement will involve benefits other than money. In many cases, an extension of benefits is offered in addition to or in the place of monetary compensation. Besides money, severance agreements may offer one or more of the following:

  • Employer-provided health insurance coverage beyond the end of employment.
  • Coverage of specific future medical expenses.
  • Assistance with new job placement.
  • Continuation or offering of other employee benefits.

Are Severance Packages Negotiable?

When an employee disagrees with the severance offer presented by the employer, there are no laws that prohibit the employer and employee from negotiating a more acceptable severance agreement. In order to reach an agreement, an employer may be willing to bargain with an employee that has a reasonable request.

Some of the conditions that may come up in severance agreement negotiations include:

  • The amount of time the employee remained with the company.
  • The vital role played by the employee.
  • The size of the company.
  • Possible stipulations for severance stated in an employment contract or company policy materials.

Disputes Are Possible

Disputes are not uncommon in regard to severance agreements. One example is a severance contract that misrepresents the conditions that the employee believed they were agreeing to, such as one that tricks the employee into signing paperwork that alters the agreement that had been reached in negotiations. Another valid dispute might be brought by an employee that finds that the payments agreed to in the severance package have not been made, or the promised benefits have not been provided.

Is it Possible to Sue After Signing a Severance Agreement?

While it is legal for an employer to protect themselves against lawsuits by establishing a severance agreement, there are some instances that negate this protection. However, if the courts agree that the agreement is unenforceable, the employee may be forced to pay back the severance compensation in order to regain their right to sue the employer for such offenses as wrongful termination. It is critical to have a lawyer in these situations.

South Jersey Employment Lawyer at The Law Offices of Leo B. Dubler, III, LLC Assists Clients With Severance Agreements

If you are offered a severance agreement, our South Jersey employment lawyer at The Law Offices of Leo B. Dubler, III, LLC can read though the document and discuss your options. Call us at 856-235-7075 or contact us online to schedule a free consultation. Located in Atlantic City and Mount Laurel, New Jersey, we serve clients throughout South Jersey, including Cherry Hill, Burlington County, and Camden County.