Essex Richards attorney Kristen Finlon

What to do when you receive a severance agreement?

Thanks to the impact of the COVID-19 pandemic, more and more companies are being forced to reduce their workforces.  In many cases, employers are offering employees severance agreements, where the employer will agree to pay the employee some amount of money in exchange for a set of legal obligations. 

Getting let go from a job is incredibly scary and stressful for a lot of people, and it can be even more scary and stressful in times such as these.  Getting handed a severance agreement can increase that stress.  Just at the moment when you’re trying to think through the ramifications of this thing that could have a huge impact on your life, you’re suddenly staring at five or ten or thirty pages of legalese and trying to figure out what to do about it. 

You probably don’t have to decide whether to sign it right away.

If you are over the age of 40, the law requires employers to afford you certain time periods to consider a severance agreement and consult with an attorney before you can be required to waive claims that you have been discriminated against on the basis of your age.  Even if you aren’t over 40, these consideration periods are often written into severance agreements as part of the standard terms.  Employers may, in rare cases, insist that an employee sign a severance agreement on the spot.  However, in most instances, the agreement will specify a deadline for you to sign.  It would be to your benefit to take some time to review the agreement thoroughly and make sure that you understand its terms.

If you think you were wrongfully terminated, you should talk to a lawyer.

If you think that there was something illegal or wrongful about your termination, you should talk to a lawyer sooner rather than later, and you should talk to that lawyer BEFORE you sign anything.  Most severance agreements contain a release of claims, meaning that once you sign the agreement you may be unable to assert your claims against the employer.  Additionally, many employment-related claims must be filed within a relatively short period of time. 

If you don’t think you were wrongfully terminated, you should still talk to a lawyer.

Once you sign your severance agreement, it will probably bind you to a number of obligations to the employer.  As with any legally binding document, it is advisable to discuss the terms of the agreement with a lawyer and make sure you fully understand it BEFORE you sign it.  Your lawyer may also be able to talk with you about negotiating with the employer to change some terms of the severance agreement, if appropriate to your situation. 

If you have other agreements with the employer, you should talk to a lawyer.

If you signed an employment agreement, a noncompetition agreement, or any other contract with your employer, its terms may be changed or affected by the severance agreement.  Be sure to alert your lawyer to the existence of these other agreements so that she can evaluate all of the documents together and determine how they will affect your rights. 

Severance pay may also have implications for you in terms of your taxes, your ability to collect unemployment, and your legal obligations going forward.  Even if you don’t plan on pursuing litigation in the future, it is worthwhile to make sure you speak with a lawyer so that you fully understand the document you’re signing and what your obligations might be.