Understanding Severance Agreements: What They Are and Why They Matter
.Severance agreements are legally binding contracts between an employer and an employee that outline the terms of an employee's departure from a company. These agreements are often used when an employee is laid off, terminated, or resigns under circumstances where the employer wishes to provide compensation or benefits beyond what is legally required. While they can provide valuable benefits to departing employees, severance agreements often contain terms that warrant careful review and negotiation.
What Is a Severance Agreement?
A severance agreement typically includes details about the compensation and benefits an employee will receive upon departure. Common components of a severance agreement include:
Severance Pay: Lump sum or continued payments based on the employee’s tenure, position, or company policies.
Continuation of Benefits: Extension of health insurance coverage or other benefits for a specified period.
Non-Compete and Non-Solicitation Clauses: Restrictions on working for competitors or soliciting clients or employees of the former employer.
Confidentiality and Non-Disparagement Provisions: Requirements to keep company information confidential and refrain from making negative statements about the employer.
Release of Claims: An agreement by the employee to waive any potential legal claims against the employer.
Return of Company Property: Terms regarding the return of laptops, phones, or other company-owned items.
Why Do Employers Require Severance Agreements?
Employers use severance agreements to protect their interests and ensure a smooth transition during an employee's departure. Key reasons employers require these agreements include:
Mitigating Legal Risks: By including a release of claims, employers reduce the likelihood of lawsuits or claims related to discrimination, wrongful termination, or unpaid wages.
Preserving Confidentiality: Employers often include clauses that protect trade secrets and prevent the disclosure of sensitive information.
Maintaining Business Relationships: Non-solicitation and non-disparagement clauses help preserve relationships with clients, employees, and the public.
Facilitating a Controlled Exit: Severance agreements ensure that both parties have a clear understanding of their rights and obligations, minimizing confusion or conflict.
Why Hire an Attorney to Review or Negotiate a Severance Agreement?
A severance agreement is a legally binding document that can significantly impact an employee's future career and financial security. Hiring an attorney to review or negotiate the agreement is a wise decision for several reasons:
Understanding Complex Legal Terms: Attorneys can help you understand the implications of non-compete clauses, release of claims, and other provisions.
Maximizing Compensation: An experienced attorney can negotiate for a higher severance payment or extended benefits based on your unique circumstances.
Ensuring Fairness: Attorneys can identify overly restrictive clauses and push for modifications that protect your ability to find new employment or pursue other opportunities.
Protecting Your Rights: A lawyer ensures that you do not waive important legal claims unintentionally and that the agreement complies with applicable state and federal laws.
Providing Leverage in Negotiations: Employers are often more willing to negotiate terms when they know an attorney is involved, which can lead to more favorable outcomes.
Conclusion
Severance agreements are critical documents that serve to protect the interests of both employers and employees. While they can offer significant benefits, these agreements often contain terms that may have long-lasting implications for the departing employee. For this reason, it is essential to consult with an experienced employment attorney who can review the agreement, negotiate more favorable terms, and ensure your rights are fully protected.
At Triangle Legal, we help employees navigate severance agreements with confidence. Our experienced attorneys are dedicated to securing the best possible outcomes for our clients. Contact Triangle Legal today to schedule a consultation and ensure your severance agreement works in your favor. Let us help you protect your rights and secure your future.
Disclaimer: This article was prepared by Triangle Legal for educational purposes only and is not intended to be a comprehensive statement of the law or legal advice. North Carolina laws change frequently and could affect the information in this article.