Severance & Release Agreements

If you are being discharged from your job, whether on account of a reduction in force, job elimination, disciplinary infraction or lay-off, your employer may present you with the opportunity to receive a severance.  There is no legal requirement that companies offer a severance and there is no established regular amount for a severance; although, many companies have severance plans that offer a set amount of money usually calculated in weeks per year of service.  The money may be offered in a lump sum or through periodic payments made during the months or weeks following termination.  Invariably, a severance offer will be set out in writing in a document that also includes a release of claims against the company.  By accepting the severance and signing an agreement that contains a release of claims, you are agreeing not to bring a lawsuit against your former employer for any violations of the law that might have occurred while you were working at the company and through the date of your signature. 

A termination, under any circumstances, is a stressful time and the ramifications of such an action can be difficult to process.  If you are discharged and offered a severance agreement, you must first check for deadlines.  Federal law requires that employees asked to sign a release that includes giving up certain discrimination claims must have time to consider it.  If you are over 40 and the severance agreement asks for a release of age discrimination claims, your employer must give you at least 21 days to decide whether or not to sign the agreement.  If your job was eliminated as part of a RIF, this period is 45 days long. In addition, you will be entitled to 7 days after signing to revoke the agreement.  However, this waiting period only applies with respect to releases of age discrimination claims.  So, if the release does not call for a release of age claims, you may be provided very little time to consider the release.   

Many severance agreements will suggest that you take time to review the agreement with an attorney.  Whether or not the agreement makes this suggestion, it is wise to do so.  The release in a severance agreement will prevent you from suing your former employer and recovering any damages you may have suffered on account of the termination.  While many severance agreements will include language that allows you to file discrimination charges with the EEOC, testify or participate in an EEOC hearing, these agreements also prevent you from recovering any money.  It is important that you discuss the circumstances of your discharge with an employment lawyer in order to make an informed decision.  In addition, there may be claims for past due commissions, unpaid expenses, bonus entitlements or future benefits under any number of federal or state statutes that you do not want to release.  

If you are in a meeting where termination and the offer of a severance is being discussed, there are several practical things you should do.  First, try to compose yourself, listen and ask questions to gather information about why you were terminated, but do not sign anything on the spur of the moment (even an exit questionnaire).  Good questions to ask include what the timetable is for your departure, who else was let go, what the policy is regarding payment of benefits, how outstanding expense reimbursements are handled, who the contact is for severance and benefit matters, and what the plan is for exchanging personal and company property after separation.  Although the company does not have an obligation to give you the documents in your personnel file, you can ask for copies of documents supporting the reason for your discharge, the company’s “summary plan description” of benefits, the handbook or employee manual, stock options or bonus plans that apply to you, your signed employment contract, and any employment agreements you may previously have signed. 

After the meeting, you should gather and save all relevant documents and copies of emails and text messages.  You should also refrain from on-line communications, including social media, about your termination or any offer you may have received.  An attorney will want to review not only the agreement but your personal documents and any provided to you by your employer.  With this information, your legal counsel will be better able to assist you in evaluating whether a severance agreement is appropriate under the circumstances. 

JF Beasley, LLC has advised hundreds of employees on the merits and risks of signing severance agreement.  If you are faced with discharge and offered of a severance agreement, we can help you understand your options.  Feel free to call us toll free at 1-855-774-3675, send us an e-mail, or fill out a consultation request form and we will contact you as soon as possible.