There are two types of severance agreements. The first kind is an agreement that is negotiated before or during an employee’s employment with a company. The second is offered to an employee at the end of their employment.
When considering whether they are interested in leaving a job for a position with a new company, employees are understandably concerned about what will happen if their employment at the new company ends. Because of this, in many cases, severance agreements play an important role in recruiting and retaining employees in important positions. These agreements provide for payments to executive employees in the event of later voluntary or involuntary termination of employment. They make a new job more attractive because they mitigate the risk that an employee is undertaking by changing employment.
Executive severance agreements often include much more than just financial terms. If your company has offered you a severance agreement, you should speak to an employment attorney who can walk you through all the terms and ensure that you are protected. If necessary, an attorney can help you negotiate a better agreement.
Even if the parties do not agree on a severance package at the beginning of an employee’s employment, an employer can still offer severance at the time of termination, usually in exchange for an agreement not to sue them.
Some employers offer their workers severance pay in the event of a job loss or mass layoff. If this is the case, the severance amount is often computed by a formula based on the length of the employee’s service. For instance, an executive who has been with a company for many years may receive a month of pay per year that he or she was with the company.
In both instances, in exchange for severance payments, you will almost certainly need to sign a release of all claims that you may have against your former employer. If this happens, you should consult with an attorney to understand the value of any claims you might have. You can then determine if the amount of the severance offer is large enough for you to decide to release your claims.
Aside from stating how much financial compensation a person will receive at the termination of their employment, executive severance agreements can also be used to establish what benefits an employee will receive after separating from the company. This could include the continuation of health insurance. Additional benefits and covered topics may include:
Finally, executive severance agreements should contain provisions providing for an employee’s beneficiaries. This means that in the event that an executive passes away before receiving severance payments, his or her designated beneficiary will receive the funds, usually in a lump sum.
Severance agreements can play an important role in whether an employee is willing to leave an old job for a new one. This can make it especially devastating when a company fails to adhere to the agreement upon termination. Fortunately, employees who do not receive what they are legally owed under a severance agreement can hold their employers accountable by filing a breach of contract claim. If you live in Ohio and your employer has not fulfilled your severance agreement, please contact us to speak to an attorney.
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