Modern Tools

What should I know about a severance agreement?

What should I know about a severance agreement?

Most severance agreements are offering you chump change to give up just about every right you’ve ever been granted under state and federal law. Here’s the typical list: claims or lawsuits for discrimination based on age, sex, race, religion, national origin, handicap, disability or “like civil rights”

How often do you have to give reasonable notice for severance?

There is a common myth that this is one month per year, but that is not the law. It is important to keep in mind that the common law entitlement to reasonable notice includes statutory notice and/or Termination Pay, as well as Severance Pay; the entitlements under the ESA are not added on top of their common law entitlements.

Why does the law of mitigation apply to severance?

That is due to the law of mitigation, which provides that if an individual obtains new employment during the notice period, any employment or self-employment income will be conducted from the amount that the former employer must pay. For that reason, it is in the employer’s best interest to assist the employee in obtaining new employment.

How is the amount of severance pay calculated?

Often, severance packages are calculated based on how long the employee has worked for the company. Employers develop their own formulas, using the time of service—for example, two weeks of severance pay for every year of employment. Calculations may also be based on the employee’s rank or position.

What are the requirements for a severance agreement?

The Older Worker Benefits Protection Act modified the Age Discrimination in Employment Act that protects workers that are 40 and older. There are some requirements that the OWBPA imposes on any severance agreement. It must be in writing. The agreement must be drafted in plain language so that the employee signing the agreement can understand it.

What not to do in severance agreements with employees over 40?

All severance agreements for employees over 40 must specifically refer to the Age Discrimination in Employment Act rights. This means directly citing the ADEA to the employee. Failure to reference the ADEA to employees may result in a lawsuit.

Are there any traps in a severance agreement?

And employees often ask for a “mutual” non-disparagement clause. Agreeing to such a mutual non-disparagement clause, without carefully drafting the language, can be a dangerous trap for employers. A mutual non-disparagement clause in which “the Company agrees not to disparage the employee” is almost impossible for the Company to honor.

Can a company sue you over a severance agreement?

Yes, you heard that right. If you force someone to sign a severance agreement or do not detail the terms of the agreement in the proper way, an employee can take you to court even if they have signed the document and sue you anyway.