Severance agreements are commonly used when employees leave a company. A severance agreement is a contract between you and your employee that dictates the terms surrounding their leaving.
A severance agreement usually provides the employee with a benefit, such as a payout, in exchange for releasing your company from future liability.
Benefits to severance agreements
There are many advantages to a severance agreement. It decreases the chance the employee will file a claim against you in the future and helps you retain respectful and amicable relationships with former employees.
However, there are some mistakes to watch out for when drafting your severance agreements.
Including illegal terms
Employees have certain legal rights no matter what. An example is the right to file a charge with the Equal Opportunity Employment Commission, such as a discrimination or harassment charge.
A severance agreement cannot contain terms waiving these rights. If your severance agreement contains language saying employees waive these types of legal rights, the language will be unenforceable.
The same goes for any language that conflicts with any state or local laws. The law supersedes any inconsistent terms in your severance agreement.
Overly broad terms
Many severance agreements contain confidentiality or non-disparagement terms. This means the employee cannot divulge trade secrets or make disparaging remarks about your business after they leave.
Be sure these provisions are not written too broadly. The employee should generally be prohibited from making defamatory statements or disclosing your trade secrets.
However, language forbidding them from talking about or saying anything negative about your company at all might be viewed as too broad. It can also lead to confusion about what can or cannot be said.
Severance agreements are commonly used when employees leave a company. A severance agreement is a contract between you and your employee that dictates the terms surrounding their leaving.
A severance agreement usually provides the employee with a benefit, such as a payout, in exchange for releasing your company from future liability.
Benefits to severance agreements
There are many advantages to a severance agreement. It decreases the chance the employee will file a claim against you in the future and helps you retain respectful and amicable relationships with former employees.
However, there are some mistakes to watch out for when drafting your severance agreements.
Including illegal terms
Employees have certain legal rights no matter what. An example is the right to file a charge with the Equal Opportunity Employment Commission, such as a discrimination or harassment charge.
A severance agreement cannot contain terms waiving these rights. If your severance agreement contains language saying employees waive these types of legal rights, the language will be unenforceable.
The same goes for any language that conflicts with any state or local laws. The law supersedes any inconsistent terms in your severance agreement.
Overly broad terms
Many severance agreements contain confidentiality or non-disparagement terms. This means the employee cannot divulge trade secrets or make disparaging remarks about your business after they leave.
Be sure these provisions are not written too broadly. The employee should generally be prohibited from making defamatory statements or disclosing your trade secrets.
However, language forbidding them from talking about or saying anything negative about your company at all might be viewed as too broad. It can also lead to confusion about what can or cannot be said.
Future claims
Finally, an employee should not waive their right to file a claim on acts that arise in the future after the agreement is signed. You might want to have your employees sign the severance agreement on their last day of work.
Otherwise, they could potentially file a claim over something that happens after they sign the agreement but while they are still working for you.
These are just some common examples of what to avoid in your severance agreements. It always helps to have them reviewed before presenting them to an employee to sign.
Finally, an employee should not waive their right to file a claim on acts that arise in the future after the agreement is signed. You might want to have your employees sign the severance agreement on their last day of work.
Otherwise, they could potentially file a claim over something that happens after they sign the agreement but while they are still working for you.
These are just some common examples of what to avoid in your severance agreements. It always helps to have them reviewed before presenting them to an employee to sign.