What Are the Components of a Severance Agreement?

Severance agreements are legally binding contracts between an employer and an employee outlining the terms of the employee’s departure from the company. These agreements protect both parties: The employee receives compensation and other benefits, while the employer secures a release of claims, reducing the risk of future legal disputes.

Severance agreements typically include several key components:

  • The amount of severance pay is usually based on the employee’s length of service and position within the company.
  • Continuation of health benefits for a specified period may also include payment for accrued but unused vacation or sick days.
  • Conditions for unemployment compensation.

Are Severance Agreements Mandatory?

Severance agreements are not mandatory by law in most circumstances. However, they are commonly offered, particularly in layoffs, corporate restructuring, or when an employee is asked to leave for reasons unrelated to performance. Some employment contracts or company policies may stipulate severance terms, making them effectively mandatory under those specific conditions.  

Can Severance Agreements Include Non-Compete Clauses?

Some severance agreements include non-compete clauses. These clauses restrict the employee from working for competitors or starting a competing business for a specified period and within a certain geographic area.

Non-compete clauses protect the employer’s business interests by preventing the departing employee from taking valuable knowledge and skills from a competitor. Employees should carefully review these clauses, as they can significantly impact future employment opportunities. Non-compete clauses must be reasonable in scope and duration to be enforceable.

What Should Employees Consider Before Signing a Severance Agreement?

Before signing a severance agreement, you should review the terms and conditions carefully. It is advisable to seek legal advice to understand the full implications of the agreement. Your employer should give you an adequate amount of time to look it over.

This is a good time to analyze whether you are giving up any legal rights or claims against the employer. Doing so could impact your future employment and financial stability.

Can Severance Agreements Be Negotiated?

Yes, depending on the circumstances. Employees should not assume that the initial offer is final. Negotiating for a higher severance pay, extended benefits, or more favorable terms in non-compete or confidentiality clauses might be possible.

Understanding your contributions to the company and the circumstances of your departure can strengthen your negotiating position. An employment lawyer can provide valuable insights and help negotiate a more favorable severance package.

Can Severance Agreements Include Retraining or Outplacement Services?

Employers may offer these services to help the departing employee transition to new employment. Retraining programs can provide new skills relevant to the job market, while outplacement services assist with job search strategies, resume writing, and interview preparation.  

What Happens If I Violate a Severance Agreement?

If an employee violates the terms of a severance agreement, the employer may have legal grounds to take action. This could include seeking repayment of severance pay or pursuing legal remedies for breach of contract.

Violations might involve breaking confidentiality agreements, non-compete clauses, or other stipulated conditions. Employees must fully understand and comply with all terms of the severance agreement to avoid potential legal consequences.

Our Experienced South Jersey Employment Lawyers at The Law Offices of Leo B. Dubler, III, LLC Help Clients With Severance Agreements

Navigating severance agreements can be challenging, but an experienced South Jersey employment lawyer at The Law Offices of Leo B. Dubler, III, LLC can help. Call 856-235-7075 or contact us online to schedule a free consultation. Located in Atlantic City and Mount Laurel, New Jersey, we serve clients in South Jersey, including Cherry Hill, Burlington County, and Camden County.