What Can be Included in a Severance Agreement?

What Can be Included in a Severance Agreement?

March, 2021

Many employers offer their employees a severance package either at the time of employment or at the time of termination. Severance packages typically provide the employee with compensation and other benefits in exchange for the employee giving up some rights, such as working for a competitor upon leaving the company. If an employer has asked you to sign a severance agreement, below are some of the provisions you might expect.

Compensation

In almost every severance agreement, an employee is promised compensation when they leave the company. Compensation typically depends on the seniority level of the employee and how long they have worked for the employer.

Medical Insurance Coverage

Once you no longer work for your employer you likely will not be able to use the same health plan you did when you were an employee. In some cases, a severance agreement may include medical insurance coverage. In most cases, employers are still required to offer COBRA gap medical coverage. 

Stock Options

Some employers offer employees stock options in addition to their wages while the employee still works for the company. After an employee leaves the company, a severance package should outline when an employee can exercise those options, and how they can do it.

Bonuses

Severance agreements should always include performance bonuses if the employee was promised these incentives and earned the right to them.

Non-Compete Agreements

Non-compete agreements prevent an employee from working for their former company’s competitor for a certain amount of time and within a certain geographic area. In order for a non-compete agreement to be enforced, the court must find that it is fair and does not unnecessarily prevent the employee from earning a living.

Non-Solicitation Agreements

A non-solicitation agreement prohibits an employee leaving the company from soliciting employees to come and work with them in their new job. Non-solicitation agreements also typically prevent employees from luring customers away from their former company to their new place of employment. Non-solicitation agreements are often an important part of severance packages.

Provision for Non-Disparagement

It is not uncommon for employers to include a non-disparagement clause in their severance packages. These clauses prohibit employees from publishing or otherwise making disparaging statements about their former employer. These clauses pertain to social media as well and often a definition of disparagement is included.

Resolving Disputes

Severance agreements also usually have a provision for how disputes will be resolved in the future. In most cases, employers will require employees to go through arbitration to resolve disputes. These clauses should always be reviewed by a lawyer, as arbitration is sometimes harmful to employees.

Call Our Columbus Employment Lawyers Before Signing a Severance Agreement

Employees often think that severance agreements are always in their best interests, but that is not always true. If your employer has asked you to sign one of these contracts, call our Ohio employment lawyers at Marshall & Forman, LLC first. We will review the agreement, make sure you thoroughly understand it, and if necessary, negotiate better terms. Call us today or contact us online to schedule a consultation.