Employment Severance Agreements – Breaking Up Doesn’t Have to Be Hard to Do

When an employer decides to terminate an employee, it may begin a chain of events that can have serious implications on the organization and its reputation.  The terminated employee will likely experience a series of emotions ranging from disappointment to a deep and personal animus towards their former employer.  These feelings, among other factors, may motivate the terminated employee to consider bringing a lawsuit against his employer which may include claims alleging discrimination, harassment or a hostile work environment.  Whether or not the terminated employee decides to bring a lawsuit, it is likely he or she will share their hostile feelings with others thereby potentially tarnishing the reputation of the organization.

In order to avoid potentially embarrassing litigation stemming from an acrimonious departure, an employer should consider preparing a severance agreement in which the former employee is provided additional compensation in exchange for a release of any and all potential claims.  Severance agreements not only provide peace of mind for the organization knowing that the risk of litigation has been minimized, but they also provide the departing employees with additional funds to assist them in their search for employment which, in turn, leaves them with a more favorable last impression of the organization.

It is always advisable to have a skilled attorney to assist in the drafting and negotiating of a severance agreement.  The severance agreement must be carefully crafted in order to prevent any potential legal challenges after the employee has left and received his or her additional benefits.  The release contained in the severance agreement should be broad enough to give the organization the most security possible, but at the same time clearly enumerate all potential claims so the former employee understands the scope of the release and the rights he/she is forfeiting.  How the release is written may vary depending on the nature of the employee’s position, the type of work performed and even the employee’s age.

The severance agreement also may be used to address some deficiencies contained in the original employment contract. These areas include, but are not limited to non-competition and non-solicitation provisions, return of physical property and the return of confidential and/or other proprietary information.  The severance agreement may also contain a non-disparagement provision in which both parties agree not make any critical, negative or unflattering remarks about the other party.  As an accommodation to the departing employee, some non-disparagement agreements may even address the language that will be used to describe the nature of the separation in case the organization is called upon to provide a reference.

The severance agreement should be carefully drafted in order to minimize any future legal challenges.  For instance, some former employees may argue that they were coerced into signing the agreement.  A properly drafted severance agreement will contain language stating that the employee is knowingly and voluntarily waiving his/her rights to pursue claims against the organization and that they have been provided sufficient time to review the severance agreement or have an attorney review it with them.  If the employee is engaged in preparing the terms of the agreement it is less likely that the employee will successfully argue that the agreement should be voided as they did not appreciate the terms of the agreement.  It is important to minimize the appearance of any coercion during the negotiation process if the severance agreement is going to survive future legal challenges.

Each situation is unique which only reinforces the importance of having a skilled and experienced attorney working to protect your interests.  It is important to retain an attorney who has extensive experience drafting severance agreements on behalf of employers as well as employees.  A properly drafted severance agreement will not only protect the client’s interests, but will also sustain any potential future legal challenges.