Severance Agreements – What You Should Know

A severance agreement is an important legal document.  Workers that are given such agreements should always consult with an experienced employment attorney to learn of their legal rights before signing them.  Below are some considerations that should be given before a worker signed a severance agreement:

  1. What about a non-compete? Do you already have one?  Does it remain in place once the severance agreement is signed?  If not, does the severance agreement add one?  Is the non-compete over broad or unduly restrictive, such that you will be unable to obtain new employment?  These are all things you and your attorney should think through before signing a severance agreement. 
  1. What about confidentiality/nondisclosure?  Some companies use confidentiality and nondisclosure agreements as a sort of “backdoor” noncompete.  If the agreement prevents you from using anything you may have learned while employed for the company, such as customer identities, pricing, etc., this could be used by the company later to attempt to prevent you from working for a competitor.  
  1. How broad is the release?  What is being released?  Some claims can’t be released.  Others can but must use very specific language.  The key is understanding what claims you may have and whether you may want to pursue them against the company, as discussed below.  
  1. Do you have any potential claims against the employer? Potential claims can give you leverage to negotiate a better package. Below are a few questions to consider:
    • Are you of a different race, age, sex, national origin, marital status, color, or religion from those who were not terminated for the same reason or offense? If so, you may have a discrimination claim.
    • Were you sexually harassed or the victim of other discriminatory harassment based upon race, age, religion, national origin, marital status, color, or disability? Did you report any of this to the company?
    • Did you recently report, object to, or refuse to participate in discrimination, harassment, or illegal activity? If so, to who, when, and was it in writing?
    • Did you recently make a worker’s compensation claim?
    • Did you recently take leave due to sickness, disability, or serious medical condition of a family member?
    • Does the employer owe you overtime or wages? While the law is somewhat murky in this area, claims under the FLSA generally cannot be waived (at least in Texas) unless the worker and company had specific discussions about how much overtime was owed as part of their negotiation over the severance agreement.
    • Did the employer breach a contract with me? Are there any unpaid commissions or bonuses that the employer owes me?
    • Am I over 40? If so, age discrimination could be a consideration.  

These are just a few things to consider before signing a severance agreement.  This article is intended for informational purposes only and should not be used as a substitute for consulting an experienced employment attorney.  Josh Borsellino is available to review severance agreements.  He can be reached at 817.908.9861 or email him by clicking this link.

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