A severance agreement is a contract. An employee waives claims in exchange for legal consideration above and beyond what he or she was entitled to receive as an employee (typically severance pay and other inducements) to sign the agreement. A common misunderstanding by employees relates to whether they are entitled to severance. Employees who are terminated from their employment are entitled by law to any unpaid wages and accrued but unpaid vacation pay, but they are not entitled to severance pay. Employers typically give severance pay to an employee in order to obtain an employee’s waiver of any claims.
In order for the release to be a voluntary waiver of statutory rights, the employee’s consent to the terms of the release must be voluntary and knowing. A typical severance agreement will include a release of any conceivable employment claim an employee may have and will include an alphabet soup recitation of the state and federal employment laws pursuant to which claims are being waived. In order to release age discrimination claims, however, the agreement must be written so as to be understood by the average employee. The employee must be advised in writing to consult with an attorney before executing the agreement. In addition, the employee must be given at least 21 days to review or if part of a plan given to a group of employees, the employee must be given 45 days to review. The agreement must provide that the employee may revoke the agreement within seven days.
The typical negotiated provisions include the consideration for the agreement, which may include severance pay, continuation of health care coverage, outplacement benefits, the confidentiality of the agreement, references, an agreement not to contest unemployment benefits and non-disparagement clauses. Severance agreements often include enforcement provisions for a breach of provisions in the agreement, such as confidentiality. These enforcement provisions are often the subject of negotiation.
Provisions in a severance agreement requiring individuals not to cooperate with an investigation by an enforcement agency such as the EEOC are void for violating public policy. The enforcement agencies must be able to investigate charges of discrimination and conduct witness interviews.
Employers should not use a “form” or “template” for a severance agreement. Each situation is different and requires a document tailored for the particular employee.
A severance agreement is a complicated document with multiple provisions which may impact profoundly upon an employee’s future. A severance agreement may place numerous restrictions on an employee which may include an agreement not to solicit clients, an agreement to keep certain information confidential and/or an agreement not to make disparaging remarks about the employer. Employees should discuss the provisions in a severance agreement with an employment lawyer before signing it. If you have any questions, please contact Boston, Massachusetts employment lawyer, Maura Greene, Law Office of Maura Greene, LLC, Six Beacon St., Suite 205, Boston, MA 02108, at 617-936-1580.