This is a sponsored column by attorneys John Berry and Kimberly Berry of Berry & Berry, PLLC, an employment and labor law firm located in Reston Town Center that specializes in federal employee, security clearance, retirement, and private sector employee matters. They write weekly on Reston Now.
We often advise executives and employees on how to best handle their severance agreements. The following are a few most commonly asked questions when a severance agreement is offered to an employee by an employer or when an employee wants to request a severance agreement from an employer.
What is a severance agreement?
A severance agreement is essentially a contract between an employee and an employer that specifies the terms of an employee’s departure. The main terms of the severance agreement include compensation for the employee and his or her release from pursuing any legal action against the employer. Severance agreements are sometimes offered to employees who are laid off or pending retirement. In addition, depending on the circumstances, a severance agreement may be offered to an employee who resigns or is terminated. The severance agreement must have consideration or something of value to which the employee is not already entitled.
Are employees entitled to severance agreements?
Generally, employers are not obligated to provide employees severance pay unless it is stipulated in an employment agreement or the employer provides it to employees according to the employer’s general practice or policy. Most employees are considered “at will,” which means they can resign or be terminated at any time.
How can employees obtain a severance agreement?
There are various ways in which severance agreements are obtained:
- An employee is terminated and the employer then offers a severance agreement;
- An employee has been terminated, no severance agreement was proposed by the employer, but the employee approaches the employer seeking one;
- An employee alleges or has filed a wrongful termination, discrimination, or other claim, and the employee and employer ultimately agree to resolve matters through a severance or settlement agreement; or
- An employee wants to resign and seeks to negotiate severance with the employer.
What terms should be included in the severance agreement?
Some terms that may be addressed in a severance agreement include, but are not limited to, the following:
- Clear employment record
- Financial terms, tax consequences, and timing of severance payment
- Continuation of employment benefits
- Waiver of claims
- Non-competition and non-solicitation
- Preservation of trade secrets and return of company property
- Recommendation letters
- Consequences for breach of the severance agreement
Is there a deadline to sign and return a severance agreement?
If a severance agreement is offered, employers generally allow employees some amount of time to consider the severance agreement before accepting it. Under existing law, an employee over 40 years of age typically has at least a 21-day consideration period to accept an employer’s severance agreement. However, if an employee is over 40 years of age and part of a reduction-in-force (RIF), he or she must be given at least a 45-day consideration period to accept an employer’s severance agreement. In addition, employees over 40 years of age have at least seven days from the date when the severance agreement was signed to revoke it.
Before employees sign a severance agreement, they should consult with an attorney to discuss the rights that they may be waiving and the terms of the severance agreement that may need further negotiation. Please be advised that this information is strictly for informational purposes only and does not constitute legal advice. If you are interested in obtaining legal advice, please contact our office at www.berrylegal.com or (703) 668-0070, if you would like to schedule a consultation.