Is Your Company’s Severance Agreement in Order?

September 26, 2019

A severance agreement is a legal document that defines the terms of separation between an employer and an employee. A typical severance agreement outlines the terms of compensation, benefits, and stipulations for the distribution of funds and for legal protections against future lawsuits. When done correctly, a severance agreement benefits both the employer and employee, but when done incorrectly, costly and time-consuming legal battles can ensue.

Key Areas of Consideration for Employers Offering Severance Packages

Employers need to be very careful when drafting severance agreements. The language of the contract and the stipulations outlined in the agreement can have a significant effect on the successful separation between an employer and employee. Employers that ensure their employees fully understand the conditions of the severance agreement can avoid future legal problems. A successful severance agreement will consider the following:

• Ensure the employee has enough time to properly evaluate an agreement before signing, and to seek legal counsel, if they wish. In a situation where a former employee brings a lawsuit against an employer after termination, they need only convince the court that they were not fully informed of the contractual terms, or that they felt coerced into signing the agreement. Ensuring that the employer has given the employee the chance to carefully consider the terms of the agreement and seek legal counsel before signing the agreement can avoid future legal battles.
• Do not prohibit the employee from filing future claims with governmental agencies, such as the Equal Employment Opportunity Commission (EEOC). Severance agreements should also allow the employee’s participation in future investigations conducted by a governmental agency. The employer has the right to include stipulations in the agreement that prohibits the employee from collecting additional compensation from the employer as a result of these investigations.
• Ensure that the employee feels satisfied that the terms of the severance agreement are fair in exchange for the benefits they receive. Disgruntled employees and those that feel they have been treated unfairly are more apt to file a future claim against an employer that imposes strict stipulations for little reward. When an employer rewards an employee’s loyalty to the corporation with monetary benefits, the former employee is more likely to refrain from filing a future lawsuit.

Attorney Review of Severance Contracts can Avoid Future Legal Problems

Employers are wise to consult with an experienced employment lawyer when drafting or revising a current severance agreement. A qualified employment lawyer can review the terms of your agreement and advise you of what future impact your severance agreement can have on your company. The legal jargon used in the severance agreement needs to be strong to hold up in court if it is challenged.

A sound severance agreement will clearly outline the terms of the agreement, the distribution of compensation and benefits offered in the agreement, and protect your company from costly and time-consuming lawsuits. Employers that continuously review and update their severance agreements have the best success with employee terminations. Legal counsel can ensure that your legal rights are protected now and in the future.

West Chester Employment Lawyers at MacMain Leinhauser Provide Counsel and Representation for Severance Agreements

The West Chester employment lawyers at MacMain Leinhauser can help your business establish severance agreements that provide legal protection from lawsuits filed from terminated employees. Call us at 484-318-7106 or contact us online to schedule a consultation today. Our West Chester, Pennsylvania offices serve clients in Philadelphia, Chester County, and throughout the state of Pennsylvania.