Should I Sign a Severance Agreement?

By Douglas Lipsky

If you are terminated, laid off or resign from your job, you may be asked to sign a severance agreement. Before doing so, you should consult an experienced employment law attorney to ensure that your rights are protected.

What is a severance agreement?

A severance agreement is a contract between an employer and employee clarifying the rights and responsibilities of each party in the event of a job termination. The agreement specifies any severance pay and other benefits that will be provided, if any. In addition, a severance agreement may include:

  • A non-disclosure clause requiring the employee to refrain from discussing any confidential business information or the circumstances of his or her termination.
  • A non-compete provision barring the employee from accepting a job with a competitor for a certain amount of time in the same geographical area.
  • A non-disparagement agreement requiring the employee to refrain from making derogatory comments about the employer, including social media posts.

Most importantly, a severance agreement typically contains a provision requiring the employee to waive his or her right to sue the employer for any reason, including discrimination, harassment, unpaid wages, wrongful termination, sexual harassment and retaliation.

Obviously, an employee who signs a severance agreement prematurely may forfeit many rights in exchange for the severance pay offered by the employer. As with all contracts, it is important to have proper legal representation before signing sign a severance agreement.

How can an attorney can help with my severance agreement?

Although employees who are being terminated are at a disadvantage, employers also want to to avoid any negative attention, which gives you leverage to negotiate. Given that ending your employment will be a financial burden, an attorney can help make sure that any severance package provides you with the pay and other benefits you deserve.

Moreover, if you believe you are the victim of employment discrimination or other illegal conduct by your employer, it is critically important not to waive your right to file a lawsuit. This is especially so for workers who are over the age of 40. Under the Older Workers Benefit Protection Act, which amended the Age Discrimination in Employment Act, employers must give you at least 21 days (under some circumstances 45 days) to consider signing a severance agreement.

The Bottom Line

Even if you don’t intend on filing a lawsuit against your former employer, it is crucial to explore all of your options when you employment ends. Although you may be under financial and emotional pressure to sign a severance agreement, you should contact an experienced employment attorney before doing so.



About the Author
Douglas Lipsky is a co-founding partner of Lipsky Lowe LLP. He has extensive experience in all areas of employment law, including discrimination, sexual harassment, hostile work environment, retaliation, wrongful discharge, breach of contract, unpaid overtime, and unpaid tips. He also represents clients in complex wage and hour claims, including collective actions under the federal Fair Labor Standards Act and class actions under the laws of many different states. If you have questions about this article, contact Douglas today.