Severance Agreement

Severance agreements are also called (or are clauses within) separation agreements or termination agreements. They often accompany non-compete and non-disclosure agreements or clauses.

A severance agreement specifies the terms of your employment termination, such as a layoff. It will probably also waive your right to sue your former employer, as do typical employee severance agreements these days.

In exchange for signing it, your employer will likely offer initial or extra severance pay.

In the absence of another agreement or contract that entitles you to receive severance pay, your soon-to-be former employer likely has the right to require you to sign a severance agreement to receive it. It's a legal "bribe" of sorts, that will help your employer avoid enforceability problems.

Your employer may not, however, rightfully coerce you into signing a severance agreement, such as by threatening to withhold wages and other pay that you've already earned.

Severance agreements are generally enforceable in the states, if they are reasonable in scope when waiving employee rights to sue. Still, employees have sued their former employers and won, despite that they signed reasonably-scoped severance agreements.

However, circumstances typically must be extraordinary to grant employees the right to break their severance agreements and sue anyway. For example, in one such lawsuit, a court determined that an employee signed a severance agreement under duress. Consequently, the court declared that the severance agreement was null and void. In turn, the employee won the lawsuit.

To discover to what extent a severance agreement is enforceable in the state in which you work, start by contacting the relevant state labor department. For enforceability specifics or legal advice about breaking your particular agreement, you'll likely need to consult an attorney.

Many employees quickly sign severance agreements just to receive the "bribe", without truly understanding that they've signed a binding contract that waives some of their employee rights.

If you have questions or doubts about signing a severance agreement, it's a good idea to first consult an attorney. To further avoid enforceability problems, your employer likely will give you a reasonable amount of time to sign, so that you may consult an attorney.

Consulting an attorney before signing will probably cost a fee. But, it could save you heartache and much more in legal expenses down the road.

See About Employment Contracts and Agreements for additional information.