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Five Things to Consider When Negotiating a Severance Agreement

If you’ve been presented with a severance agreement, you might be tempted to sign it immediately if its terms appear to be generous. But it might be a good idea to consult with an employment attorney first. Even if you decide not to hire an attorney to review your severance agreement, you should think about the following considerations before signing on the dotted line.

1. You May Already Be Owed a Substantial Payout

Depending on your compensation structure and when you’re leaving your employer, you may be entitled to a significant accrued monetary benefit. You should confirm that any severance pay you’re receiving in your severance agreement is above and beyond money you’ve already earned, such as paid vacation time and accrued commissions.

If you’re not careful, you could find yourself agreeing to limit your rights under a severance package that only includes money you’re legally entitled to without a severance agreement.

2. Your Severance Offer Doesn’t Necessarily Mean Your Employer Did Something Illegal

When presented with a severance agreement, your initial reaction may be that your employer did something illegal and is trying to buy your silence. This reaction makes sense: it’s logical to assume that an employer wouldn’t ask an employee to waive a right to sue unless it believed it could be sued.

But a severance agreement may simply represent your employer’s belief that a lawsuit is possible—regardless of whether it’s successful—and it’s an easy way to remove that possibility. In the alternative, the severance agreement could be your employer’s opportunity to get you to agree to a restrictive covenant, such as a nonsolicitation, noncompete, or nondisparagement clause.

3. You Can Hire an Attorney Without Your Employer Knowing About It

Sometimes an employee wants to negotiate the terms of a severance agreement but is afraid to hire an employment attorney for assistance. An employee might fear that showing up with an attorney could put the employer on the defensive, making it harder to negotiate. Or it might make a bad impression on the employer, making it more difficult to end the employment relationship on good terms.

If you’re worried about these negatives, you have the option of hiring an attorney to advise you from afar, giving you advice and strategies that you can use when negotiating the severance agreement on your own.

4. Money Isn’t Everything

Sure, a big severance cash payout is nice, but depending on the nature of your profession, a release from a noncompete or nonsolicitation agreement can be worth a lot more. If that’s not possible, you may be able to at least reduce the amount of time you’re subject to one of these restrictive covenants.

Then there are other benefits to consider, such as health insurance. Having your employer pay another six months of health insurance benefits could add up to more money in your pocket than an extra few months of severance pay.

5. Litigation Is Always Risky

You may hesitate to sign a severance agreement if you have a potential legal claim against your employer, such as illegal discrimination or creation of a hostile work environment. While your legal claim is probably worth more than the benefits included in your severance package, you should bear in mind that, as the saying goes, “a bird in the hand is worth two in the bush.” There’s always the risk of losing your lawsuit; even if it results in a win or a big settlement, it could take years and a lot of unpleasant litigation to get there.

Ultimately, if you think you have a good claim, you should consult with an employment attorney to fully understand whether your employer’s severance offer is enough to forgo a potential lawsuit.

For More Information

Do you still have questions about severance agreements? Need help applying this information to your own case? Please feel free to contact us to discuss your specific situation.

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