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Severance agreements can make terminations go smoothly

On Behalf of | Aug 2, 2022 | Employer Law (Employer)

When a Central Pennsylvania employer has to make the difficult decision to let an employee go, they should consider offering a severance agreement.

Severance agreements are not mandatory under Pennsylvania law, so companies do not have to offer them. However, severance agreements do offer some mutual benefits. For employees, they give some financial security in the form of severance pay or ongoing benefits. An employer may also agree to help them find a new job.

A severance agreement may even be a way of softening a termination a bit so that the employee does not leave with a bad taste in their mouth. In this way, they can protect a business’ reputation as a good place to work.

For employers, severance agreements also can drastically reduce the chances of litigation or other action against the business. Employees are, after all, many times very willing to fight for their jobs.

They also give businesses a sense of certainty as to how much a termination will cost them both in terms of expenses and non-economic losses, like the loss of confidential information that a former employee had.

Finally, the agreement may just seem like the right thing to do.

What do I need to include in a severance agreement?

An employer will of course want to make sure that their severance agreement will hold up in court.

One important consideration is that an employer must offer some additional compensation, usually severance pay, in exchange for the employee’s signing the agreement. An employer may not require a signature in exchange for pay that an employee has already earned.

Also, employers should remember that there are certain rights which an employee may not waive, even if they sign a severance agreement.

For example, while they may knowingly and voluntarily waive their right to sue in court, employees always have the option to complain to the federal Equal Employment Opportunity Commission about discrimination.

Additionally, employers may have other items they wish to include in their severance agreements as well.

For example, they may ask an employee to waive their option to pursue unemployment benefits, or they may require an employee to keep certain information they learned at work confidential.