FAQ- SEVERANCE AGREEMENTS
A: Unless an employer has promised to pay severance pay, either by contract or by under an existing Employee Benefit Plan, there is no requirement under either state or federal law that an employer pay severance to terminated employees.
A: There are several reasons, but probably the most common reason is to secure a release of all claims, past, present, and future, that an employee might have against an employer in exchange for a sum of money to the employee. If an employee has a valid claim against the company, the severance amount can be negotiated to be larger than it otherwise might have been.
A: Typically, severance is equal to one week of pay per year to mid-level executives, and up to a month per year for top-placed executives. Naturally, some employers are more generous than others. Often times, severance is several months of pay and a continuation of insurance benefits for that period of time. However, depending on the situation, the baseline payment or benefits can be negotiated upward to reflect the rights being waived as a result of the payment or an actual settlement of employee claims.
A: A severance agreement is a binding legal document in which the employee gives up valuable legal rights for a sum of money. Additionally, the employee may be agreeing to clauses that could adversely impact him/her in the future and potentially subject the employee to legal action that far outweigh the amount of the severance. Often times the severance agreement contains language that makes little sense or seems benign when the opposite is true. Before signing, you should have the severance agreement reviewed by a qualified attorney who can discuss it with you and suggest further options in light of your individual situation, such as negotiations to make the agreement much more mutually acceptable.
A: Whether or not you are entitled to severance will depend on a number of things including the employer's defined benefit plan, the custom and practice in the Company or the industry, who in the Company received severance, and why they received severance. Since you may or may not be entitled to severance depending on your particular situation, you should seek the assistance of a qualified employment lawyer to review the circumstances of your termination and see if negotiations for a severance might be in order.
A: Often times, non-disparagement clauses can be included in a severance agreement, procedures regarding references can be specified, or a positive letter of reference can be required as part of the severance agreement. This issue is typically negotiated as part of a mutually-agreeable severance agreement. If you are being asked to sign a severance agreement, you should seek the services of a qualified employment attorney to review the agreement in light of your own circumstances.