Severance Agreements

A Severance Agreement, which may also be referred to as a Settlement Agreement and Release, is an agreement between an employer and former employee in which the employer provides some form of consideration, generally in the form of a sum of money to an employee, in exchange for the employee agreeing to release all legal claims that the former employee may have against an employer. Subject to certain exceptions, most Pennsylvania employees are considered “at will”, which means an employee can resign at any time and be terminated at any time. Sometimes when employment ceases, employers offer severance pay in exchange for employees giving up certain rights. An employer will rarely provide severance pay without a Severance Agreement, which requires the employee to waive certain legal rights. A Pennsylvania employment lawyer will review a proposed Severance Agreement with a client, assess the facts concerning the termination of employment and evaluate the offer by weighing the offer in the proposed Severance Agreement against the legal claims that the employee would be waiving. Abramson Employment Law is frequently retained by clients to review Severance Agreements. Depending upon the circumstances which led to the termination of employment, the employee rights that an employee is being asked to waive may have significant value exceeding the employer’s offer. Consequently, an employer’s initial offer should not be accepted without careful legal evaluation.

Negotiating a Severance Agreement

There are several possible ways that Severance Agreements may come about:

  • An employee is terminated and the employer offers a Severance Agreement.
  • An employee has been terminated, no Severance Agreement has been proposed, but the employee through an experienced Pennsylvania employment law attorney, approaches the employer seeking a Severance Agreement, by sending a detailed demand letter to the employer.
  • Due to circumstances at the workplace, an employee is interested in resigning and seeks an employment lawyer to negotiate severance.

Just because a company offers a Severance Agreement does not mean that an employee should immediately sign and accept the original Severance Agreement. An employee may be waiving legal rights that have a value that is more substantial than the consideration that is being provided under the Severance Agreement. For example, if the circumstances surrounding the termination of employment lead to a conclusion that an employee has a viable employment discrimination claim, such as age discrimination, race discrimination, sex discrimination, retaliation, or another claim that is protected by federal or Pennsylvania employment laws, the employee may have a claim that is worth more substantially more than the financial consideration that is being provided by the Severance Agreement. In these type of situations, an employee may hire an employment lawyer to attempt to negotiate more severance pay, or if necessary, proceed with the filing of a Charge of discrimination or a lawsuit.

In addition to an employee waiving all claims against the employer, a Severance Agreement may include other terms which have legal consequences to the employee’s future such as a noncompete agreement (i.e. restrictive covenant) which impacts an employee’s future job prospects. An employee being asked to sign a Severance Agreement must assess all circumstances before signing a Severance Agreement.

An employee being asked to sign a Severance Agreement should retain a lawyer in order to review a proposed Severance Agreement in conjunction with a comprehensive consultation in which the all facts surrounding the termination of employment are discussed. As part of the consultation, an experienced Pennsylvania employment lawyer will want to speak to the employee about the work environment, work performance, future employment aspirations, the reason that the employer provided for the termination and common issues that arise when a Severance Agreement is proposed to a terminated employee.

There are a number of issues that may be addressed in a Settlement Agreement or negotiated when an employee retains a Pennsylvania lawyer in order to negotiate more favorable terms. These issues may include:

  • Financial terms, tax consequences and timing of severance payments
  • Continuation of employer paid employment benefits (such as health insurance) for a period of time
  • Claims that are being waived
  • Confidentiality
  • Non-Disparagement
  • Re-employment possibilities
  • Scope of a Noncompete Agreement / restrictive covenant
  • Preservation of trade secrets
  • Non-solicitation of the employer’s customer or clients
  • Employment References
  • Issues concerning the right to unemployment compensation
  • Employer paid outplacement services
  • Employment laws that apply to the employee’s particular situation
  • Consequences of violating the terms of the Severance Agreement

The Older Workers Benefit Protection Act (OWBPA)

When an employer is seeking to have an employee, who is 40 years of age or older waive rights in signing a Severance Agreement, the Older Workers Benefit Protection Act (OWBPA), which is part of the Age Discrimination in Employment Act (ADEA), has certain requirements which must be satisfied for the employee to waive an age discrimination claim. An employee must be provided with a minimum of 21 days to review the Severance Agreement before signing the agreement, and a period of at least seven days after signing the agreement for the employee to revoke the agreement. In situations where the reason for the termination of employment is a reduction in force at the workplace, there are additional requirements. The period of time to consider the Severance Agreement is extended from 21 days to 45 days. In addition, the employer must supply the employee with a list of employees (by job title and age) who are being terminated and those who are not being terminated within the employer’s work unit.

When you need an experienced Philadelphia employment lawyer to review a Severance Agreement, Call us today at 267-470-4742 or contact us online to discuss your legal options.

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