A severance agreement is a contract created between an employer and departing employee which generally provides for compensation the employee is to receive upon or soon after departure and which governs the rights and relationships between the employer and employee going forward.
The compensation is usually the easy part because it has the least amount of legalese. A typical severance agreement will stipulate that an employee is to receive cash compensation in one lump sum or installments. In more complex agreements, provisions regarding retirement benefits, pensions, etc. will be included.
More often over-looked clauses in severance agreements are lawsuit waivers and non-solicitation provisions. These clauses are often neglected because the employee is most concerned about compensation. However, it is absolutely vital that one fully grasp the implications of a claims release provision because if they are properly drafted they legally relinquish any and all claims you could have brought against an employer. Furthermore, with respect to non-compete provisions, seemingly innocuous language can make the world of difference in non-solicitation and/or non-compete clauses. There is for instance, all the difference between a prohibition on conducting business with customers and potential employers; the former is likely valid, while the latter may be vague, unenforceable, and, therefore, illegal. It is extremely important to retain legal counsel to ensure that you understand your rights and the legal ramifications of the agreement.
Contact us for a free consultation regarding severance agreements, lawsuit waivers, and non-compete/non-solicitation agreements.