Severance Agreements During COVID-19

Severance Agreements During COVID-19 (and always)

Companies are laying people off at unprecedented rates and unemployment has skyrocketed because of the coronavirus. Companies don’t have to offer you a severance package, but some of them are offering severance packages. Severance packages can be worth a lot of money and can have other types of value, and they are typically negotiable. An attorney can help you negotiate more money and can also help you negotiate the terms of your severance agreement. Sometimes the terms restrict your ability to compete in the future and may make it hard for you to find another job. So, be careful. Read each clause carefully, and consider hiring an attorney to help ensure you aren’t agreeing to something that could hinder you later. Below is a list of six things to watch out for and potentially negotiate.

(1) The severance payment

Often companies will include a clause that offers money totaling a certain number of weeks or months of the departing employee’s salary or compensation. This can range from 1-2 weeks all the way up to years (although that’s unusual). Some companies have policies that they offer one week for every year the employee was employed, other companies offer a severance payment based the specific circumstances. Whatever the amount and the reason, this payment is often negotiable.

(2) Non-compete clauses

Some severance agreements add in a clause preventing the departing employee from working for a competing business for a certain amount of time. Depending on the scope, this can be incredibly limited and is likely negotiable. Some severance agreements offer very little money and include a non-compete clause, which can make it a win for the employer.

(3) Non-disparagement

Most severance agreements contain a non-disparagement clause that prevents the departing employee from saying negative things about the employer. This is to be expected but can be mutual. It is worth asking the employer to make it mutual, and to include specific language about how the employer will handle calls from inquiring about the departing employee.

(4) Confidentiality

Like non-disparagement clauses, most agreements will contain a confidentiality clause that mandates than an employee keep the terms of the agreement confidential. Oftentimes, confidentiality is important to the employer and is not negotiable, but sometimes you can negotiate to make it mutual.

(5) Release of claims

I have never seen a severance agreement that didn’t contain a release of claims. That is, generally, the reason an employer offers a severance. They want to avoid the risk of an employee suing them in the future. A release of claims clause is to be expected, but it can be weighed heavily in favor of the employer. It could be worth negotiating a release that is mutual. And any release of claims should include language listing out the types of claims that the departing employee is not releasing.

(6) Liquidation/Penalties

Many severance agreements will contain a clause about how to handle a breach of the agreement. This is a dangerous place where employees can give up a lot without realizing it. There are generally two important parts to this type of clause. First, who is responsible for the legal fees if a fight over the agreement should arise. Employers sometimes slip in language to make the employee responsible for all costs and fees, without mentioning what happens if the employer breaches, and without mentioning the degree to which the employer must prove a breach before they are entitled to go after the employee for costs and fees. And, second, the penalty if the employee is found to have breached the agreement. In some cases, the severance agreement has language to support the employer reclaiming all money paid as part of the agreement, no matter how serious the breach. Watch out for this type of language. it is almost always negotiable.

In conclusion, there are lots of ways in which a severance agreement can be drafted in favor of the employer, and there are lots of ways in can be negotiated to be more favorable to the departing employee. Read your agreement and consult with an attorney to make sure you are getting the best terms possible and that you understand what you are agreeing to.