When a person is let go from their position, their company may require them to sign a document known as a severance agreement. While severance compensation is typically the most visible aspect of a severance agreement, numerous other crucial clauses can and ought to be included in these binding contracts.
Employment law includes many vital documents, including severance agreements. Before signing any contracts, be sure that they are protecting your interests. For effective exercise of your rights, seek legal guidance from a Paramus employment attorney.
Severance Agreement: What Should It Include?
Employers are not compelled to provide an employee with severance compensation unless a contract or corporate policy document states they must. It is typically at the company’s expense to mention severance compensation in a severance agreement if it is included in the package.
Additionally, the employer frequently inserts a release of claims language in the severance agreement along with the severance money. As a result, the employee will waive any claims against the employer in exchange for severance pay. A release of claims section in a severance agreement is quite common and fully enforceable.
The severance agreement should specify any severance money, the date of termination and any confidentiality obligations the employee will have after termination, such as the need to keep the terms of the release stipulated in the severance agreement confidential.
A severance agreement should also contain information about benefits, including how long the employee will have access to them after being fired. Companies with a group insurance plan that provides benefits to at least 20 employees must provide COBRA continuing coverage.
To ensure the work connection is ended on a good note and to tie up any loose ends, a reference letter may be attached to a severance agreement.
Severance agreements often include a clause prohibiting the employee from accusing the company of misconduct and a non-disparagement clause.
In addition, the severance agreement should contain a number of customary legal provisions, such as one controlling legislation. The governing law clause will probably apply and specify which jurisdiction’s laws will apply in such cases if any disputes arise from the severance agreement.
There may also be an arbitration clause stipulating that the parties to the severance agreement will forego the right to file a lawsuit and will instead submit any claims to binding arbitration.
