Top ten terms in a severance agreement

Gordon Law Group

An employment severance agreement, also known as a separation agreement, typically includes several important terms and provisions. While the specific contents may vary based on the jurisdiction and the nature of the employment, here are the top 10 common termsto watch out for:

  1. Parties: Identify the employer and the employee entering into the agreement.  The concern here is making sure that the name of the employer is correct.  Companies often list themselves and then a raft of affiliated entities (either explicitly or by implication), so that all of them get the benefit of the restrictions placed on the former employee.
  2. Termination Date: Should clearly state the date the employment termination becomes effective.  This is important, especially if you’ve negotiated a garden leave or continuing employment.  It is often very helpful to get an agreement to allow you to continue working, even if you’re not in the office, as the continued employment will make it easier to find new work.  It’s easier to find work while you are employed and in a position of strength than unemployed.
  3. Severance Benefits: Outline the compensation and benefits the employee will receive upon termination. This may include severance pay, continuation of health insurance (often through COBRA), unused vacation or sick leave payout, or other entitlements.
  4. Release of Claims: Employers typically want a full release of all claims you could have against them.  The biggest concern here is including claims you may not want released when considering the amount of money the employer is offering.  If you actually have claims (typically for discrimination or retaliation), you might be willing to release them for more severance, but unless you know, you should be careful.  Also, employees should ask for a release of claims the company may have against them, and although the employer may not want to release all claims it may have against the employee, the employer should be willing to release claims it actually knows about.
  5. Confidentiality/Non-Disclosure: These provisions typically specify that the employee must maintain the confidentiality of any trade secrets, proprietary information, or sensitive company information even after termination.  This may include the severance agreement itself.
  6. Non-Disparagement: This typically prohibits the employee from making negative or disparaging remarks about the employer or its employees.  The employee should look for some relief here, too, to make sure the employer’s people won’t say anything bad – especially something that could hurt the employee’s job search.
  7. Non-Competition:  These provisions typically restate restrictions on the employee’s ability to compete with the employer for a specified period of time and within a specific geographic area.  Sometimes an employee can ask to narrow the scope of a non-compete, to make it easier to find new work.
  8. Non-Solicitation:  These provisions typically restrict the employee’s ability to solicit its clients or employees for a specified period of time.  If the employee brought clients or other employees into the company, she may be able to request relief to take them with her on the way out.
  9. Return of Company Property: Require the employee to return any company-owned property, documents, or intellectual property.
  10. Governing Law and Arbitration: Specify the jurisdiction and laws that will govern the interpretation and enforcement of the agreement.

It’s important to note that employment laws can vary, so consulting with an employment attorney or legal professional is advisable when presented with a severance agreement to ensure compliance with applicable laws and regulations in your specific jurisdiction.

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