Receiving a severance agreement can be confusing. After a termination or layoff, many employees feel like they must sign the agreement quickly. Understand that severance agreements can affect your legal rights and future job opportunities, or give rise to potential legal claims.
A severance agreement usually provides you with compensation for giving up some of your legal rights. Although the agreement itself may seem simple, there are often many complex provisions that should be carefully reviewed before you sign.
Before you sign any severance agreement, you should make sure that you know when to not sign, as well as what factors to consider.
Should I Sign a Severance Agreement?
Upon receiving a severance agreement, most employees immediately ask themselves: should I agree to a severance deal? The answer is different for everyone depending upon the individual contract’s stipulations, current employment situation, and whether there could be legal actions involved. Typically, a quick signature could result in forfeiting valuable rights.
In general, a severance could be beneficial if it
- Provides adequate compensation
- Contains minimal restrictions upon you
- Does not create job-related legal issues.
Conversely, if the agreement contains extensive restrictions or unclear language, pressure to sign right away or be fired might warrant at least taking a step back before signing.
Lastly, reviewing the agreement, asking others about their past experience with similar agreements, and/or consulting an employment lawyer that has experience with severance agreements are strongly advised prior to moving forward.
Red Flags in the Severance Agreement
Before signing a severance agreement there are numerous signs that should raise a red flag. The following provisions are signs you should carefully consider before signing a severance agreement.
Non Competes and Restrictive Clauses
Non-competition clauses and restrictive covenants can severely limit your ability to work in your industry post-termination. In New Jersey, restrictive covenants must be reasonable in terms of time, geography, and scope in order to be valid.
If you have been presented with a severance agreement containing broad non-compete restrictions, then it may be beneficial for you to discuss these provisions with a severance agreement attorney prior to signing the agreement. These restrictions could prevent you from working for any competitor or starting your own business.
Courts in New Jersey typically analyze whether restrictive covenants are reasonable in light of the necessary protection of a legitimate business interest. If the restrictions are overly broad they may be considered unenforceable.
Unclear or Ambiguous Contract Language
Many severance agreements have complicated legal wording. If the terms are not clear to you, you may not understand your obligations fully.
Cryptic text could create unintended obligations or restrict your rights. A lawyer can help clarify these terms for you before you sign the severance agreement.
Unreasonable Confidentiality Provisions
Certain severance contracts have severe confidentiality requirements that prohibit you from talking about concerns at work. New Jersey law does not allow for confidentiality clauses that try to hide the claims of discrimination, harassment or retaliation. It is important for employees to carefully review the confidentiality provisions in their severance agreement before signing it.
Employees should also check to see if any confidentiality agreements will prevent them from cooperating with a government investigation, or from reporting a violation of the law.
Limited Release of Claims
Numerous separation agreements obligate employees to give up their legal rights to take action against their employer. This can encompass any type of discrimination or retaliation dispute, as well as causes for wrongful termination and wages owed. Releases once executed may prove very cumbersome to contest. When receiving minimal severance monies, it may not be advantageous to sign a broad release.
Pressure to Sign Quickly
It is customary for employers to set deadlines for signing severance agreements. However, when the employer places too much urgency on an employee to sign the agreement quickly, this could signal a potential violation of the law.
An employee should also have sufficient time to evaluate the proposed severance agreement. Furthermore, if the employee is 40 years of age or older, they could have additional protections under the Federal Laws regarding severance agreements, including certain reviewing periods for severance agreements that release any rights to pursue age discrimination claims.
Insufficient Severance Pay
A severance package must reflect both tenure and situation. Therefore, if the severance offered is small, you might consider trying to negotiate a better offer. Severance agreements are negotiable and many times employers will suggest otherwise, however, do not assume that is the case.
Why You Should Have a Severance Agreement Review by a Lawyer
A lawyer’s review of your severance package will give insight into potential risks and opportunities which may not be apparent otherwise. A severance package lawyer will review restrictive covenants, evaluate your compensation, and identify any potential legal claims that could arise from the terms of the severance package.
A lawyer may also assist with negotiating a severance package and obtaining more favorable compensation, benefits, and references.
When you have a lawyer review your severance agreement, you will have a clear understanding of what your rights are prior to signing the severance agreement.
Can a Severance Package Be Negotiated?
Many severance agreements can be negotiated. Negotiating in this situation can include items such as more pay or money, more time to continue receiving benefits, or different types of restrictions. Many employers expect you to negotiate with them for your severance agreement and may offer you to change or adjust certain parts of your contract.
In most cases, negotiations could result in you having a positive experience with this process.
Do I Have to Sign a Severance Agreement?
The choice to sign a severance agreement is up to you. If you do not sign a severance agreement, you may be ineligible for separation pay but will generally continue to have legal rights.
When to Speak With a Severance Lawyer
If any of the following apply to you, you should consider consulting with a severance lawyer:
- You believe you were wrongfully terminated
- There are restrictive covenants in your agreement
- The severance amount doesn’t seem fair to you
- You feel pressure to sign quickly
A severance lawyer can help you evaluate your situation and figure out if signing makes sense for you.
Speak With a Severance Agreement Attorney Today
If you aren’t sure about whether or not to sign a severance agreement, an attorney that concentrates on severance agreements can advise you on protecting your rights and future work opportunities.
Call Ayesha Hamilton Law today to set up an appointment to go over your severance agreement.
Work with an experienced Employment & Business Lawyer in South Jersey to protect your rights and plan your next steps with confidence.