Many people think a severance agreement is straightforward: their employer is paying them to peacefully walk away after the termination of their employment. But this oversimplification can have far-reaching consequences. Many severance agreements contain provisions that restrict an employee’s rights and future opportunities. These provisions do more than just curtail your ability to sue your employer; they may prevent you from collecting unemployment benefits, control how references are handled, or limit who you can work for or the clients you can service.
If you were presented with a severance package, we recommend having RKPT's employment lawyers review it and explain its terms before you sign so you understand precisely what you are agreeing to.
Why Do Employers Offer Severance Packages to Employees?
Employers offer severance packages for many reasons. An employer may offer a severance package as recognition of an employee’s years of service, to help the employer remain competitive in the industry, or to reduce the “sting” of an involuntary layoff. Employers also offer severance packages to reduce the likelihood of future lawsuits by having a terminated employee sign a release in exchange for the severance package payout.
Traditionally, employers offered severance package payouts of two weeks of wages for every year of service. But today, severance packages vary widely. Factors that contribute to severance package payouts include performance, the size of the company, the employee’s position within the company, employment policies, and the terms of an employment contract.
Are Employers Required to Offer a Severance Package?
Neither federal nor Ohio law requires that an employer offer a terminated employee a severance package, even if the employee was terminated without cause. However, you should still speak to an employment lawyer even if you were not offered a severance package. If your employer violated state or federal employment laws, our lawyers may be able to negotiate a favorable severance package in exchange for a release of your claims.
What Does a Severance Agreement Cover?
Most severance agreements include a general release of claims, meaning that the employee agrees to waive all legal claims, whether known or unknown, in exchange for a severance payment. However, it is almost impossible for a terminated employee to know all the legal claims they may have. Therefore, it is wise to have an experienced employment lawyer review your situation and the terms of the proposed severance package before you sign the agreement.
In addition, most severance agreements include confidentiality clauses, non-compete clauses, and non-disparagement clauses, many of which are unfamiliar to most employees. A lawyer can review the terms of the proposed severance package and explain them so you understand precisely what you are agreeing to before you sign.
Can I Negotiate the Terms of My Severance Package?
Every situation is unique, but in general, severance agreements can be negotiated. A severance agreement is a contract between you and your former employer, and, like any contract, its terms can be negotiated. A lawyer can review your situation and may be able to negotiate for a higher amount of severance pay, a longer period of health insurance benefits, additional outplacement services, or other forms of compensation.
How Much Time Do I Have to Review my Severance Agreement?
Most employers set a specific time limit for employees to review and sign a severance agreement. Otherwise, the employer will withdraw the offer. Under the Age Discrimination in Employment Act (ADEA) and the Older Workers Benefit Protection Act (OWBPA), terminated employees over the age of 40 must be given at least 21 days to review and accept a severance agreement. These employees also have the right to revoke their acceptance of the severance agreement within seven days of signing it. Terminated employees over age 40 who are part of a mass layoff or workforce reduction must be given at least 45 days to review and accept the severance agreement.
How Can An Employment Lawyer Help?
RKPT’s employment lawyers can help you make an informed decision about whether or not to sign a severance agreement and help ensure you understand the terms of the severance package you are agreeing to if you do sign.
Our lawyers can:
- Review and explain the terms of the severance agreement so you can make an informed decision about the rights you agree to give up by signing the severance agreement;
- Evaluate the severance payment amount and evaluate whether you should be paid more;
- Negotiate the terms of the severance agreement, including non-compete, non-disparagement, and confidentiality clauses, eligibility for unemployment benefits, health insurance, and other items;
- Identify legal claims you might have that would allow you to negotiate for different severance terms.
If you were presented with a severance package, we recommend having our employment lawyers review the terms of the severance agreement. Call (513) 721-3330 or contact us online to learn more about our employment law services and to schedule an appointment to discuss your situation and how we can help.
