If You Get a Severance Agreement, What Should It Include?

Generally speaking employers offer severance when there is a layoff, job elimination or to reward a loyal employee who is leaving. Severance is a benefit, not a right. The idea of a severance agreement is to lessen the economic burden on the employee after being let go, while also providing some legal protections and a boost to the reputation of the employer. When done correctly, a severance agreement can be a great win-win for both sides.

In the typical severance agreement, you can expect four points:

1. Severance pay: The first thing you can expect is some form of severance pay that is typically one or two weeks of pay each one year of employment before the employee was let go.
2. Unpaid PTO: You should also be paid any remaining PTO owed to you when you are severed from employment unexpectedly or early. If you had 40 hours of unused vacation time, for example, then you should get your final paycheck plus 40 hours of PTO pay. On the other hand, employees who are negative on PTO will see a reduction on their final paycheck equal to that amount. Unused sick pay is generally not provided in a severance agreement.
3. Health insurance options: Some severance agreements will present options to continue or receive health insurance coverage after your employment ends. You might be kept on the company’s insurance policy for another 30 days, for example, or the company’s insurer may offer to sell you individual insurance coverage at a reduced rate. It is also possible to get health insurance coverage through federal COBRA law.
4. Protective clauses: Lastly, you can expect your severance agreement to have clauses that protect the employer from further complications. There may be a non-compete clause that says you cannot work for local competitors for a year or so, a non-disparagement clause that says you cannot speak poorly of your employer for some time, and even a clause that says you cannot sue your employer for any reason based on discrepancies or violations that occurred while you were employed.

The last bit about not being able to sue your employer is the biggest reason why you should always be careful about accepting a severance agreement upfront. You could be nullifying your chances of obtaining remedies through a lawsuit, such as one instituted due to workplace discrimination or wage and hour violations.

Before you sign a severance agreement, call (646) 490-0221 to connect with the New York severance agreement attorneys of Schwartz Perry & Heller LLP. We are backed by more than 30 years of legal experience focused on protecting the rights and best interests of hardworking Americans just like you! Contact us today to arrange for a severance agreement review from our employment lawyers.