Severance Agreement Review and Negotiation

Severance Agreement

One of the most difficult and uncertain times in a person’s life can come from an unexpected job loss.  Studies have shown that being fired consistently ranks near the top of the most stressful life-altering events people experience.  The Employment Law Attorneys at Abney Law have years of experience navigating our clients through a job loss and guiding them to the fair resolution of the separation that they deserve.

We frequently advise and advocate for our clients in the review and negotiation of Severance Agreements.  In its most basic form, a Severance Agreement is a contract that controls the rights and responsibilities of an employer and employee when an employee is fired.  Most people associate severance pay with Severance Agreements, but severance pay is only one of many aspects a Severance Agreement could include. 

Below are some of the most common questions and concerts we deal with regarding Severance Agreements. 

Is my employer required to pay me severance?

The most common question we get on this topic is whether an employer is required by law to pay an employee severance when he or she is fired.  The short answer to this question is no.  Our Kentucky Employment Law Blog contains an article, Am I Entitled to Severance, that takes a deeper look at this question, but generally unless you have a written contract that states otherwise, in Kentucky, employers are not required to pay severance at the end of employment.

Employers most often offer severance packages to employees when they think it might have some legal liability to the employee.  For example, if the employer is concerned that it wrongfully terminated its employee, the employee was harassed, denied certain rights, or discriminated against, the employer may offer a severance package to protect itself from liability.

What do I have to give up when I sign a Severance Agreement?

We’ve all heard the old saying, “Nothing in life is free.”  This adage is particularly true when it comes to Severance Agreements.  If your employer provides you with severance pay at the end of your employment, it will almost certainly expect something in return.  

Almost all Severance Agreements include a general liability release, which means when you sign the Agreement, you give up all legal claims you might have against your employer and promise never to pursue them in the future.

Many Severance Agreements also include Non-Competition Clauses and Confidentiality Agreements.  Non-Competition clauses limit your ability to work for your former employer’s competitors, sometimes for years.  Confidentiality Agreements can prohibit you from discussing certain aspects of your former job, including the Severance Agreement itself.

It is essential to have a knowledgeable employment law attorney review your Severance Agreement before you sign, so you completely understand not just what you are receiving but also what you are giving up.

My employer didn’t offer me a severance package when I was fired.  What now?

The reality is most employers don’t offer severance packages or severance pay when they fire an employee.  Kentucky law doesn’t require employers to offer severance pay, and most employers will go to great links to avoid paying a fired employee anything — this is where the attorneys at Abney Law come in.  We negotiate Severance Packages starting from scratch for many clients every year.  The key to negotiating severance is finding subtle points of leverage against the employer and using them.  That leverage may come in the form of how you were terminated — for example, was the termination discriminatory, was it retaliatory, or were you fired after being denied some statutory right like medical leave under the FMLA.  The leverage can also come from how you were treated during your employment — were you illegally harassed, were you denied overtime, or were you being forced to work in unsafe conditions.  Our attorneys are highly experienced in finding these leverage points and using them to get you the severance package you deserve.    

Negotiating Severance – What should I ask for?  

When a new client comes to our office with a proposed severance package in hand, they often have questions about whether they should be asking for anything else in addition to severance pay.  Severance Agreements can be negotiated and tailored to meet the specific needs of each situation.  Several enhancements we often seek in our clients’ Severance Agreements are: 

  1. An agreement from the employer to not oppose the client’s application for unemployment benefits; 
  1. A positive, or at least, neutral employment reference for the client; 
  1. Payment of COBRA premiums to continue the client’s healthcare coverage; and 
  1. Release from any existing non-competition agreements.

We’ve found that these enhancements to Severance Agreements can greatly benefit our clients in both the short-term and long-term, and we work hard to add them to any Severance Agreement we negotiate.  

Hidden Pitfalls – Talk to an Employment Law Attorney before you sign a Severance Agreement.

As discussed above, your employer will expect something in return for offering you a severance package.  That may be an agreement to enter into a non-competition agreement or even an agreement to help train your replacement.  You must be aware of these obligations and weigh their costs against the benefit you are receiving from the Severance Agreement.  For example, if your employer requires that you sign a two-year non-competition agreement in exchange for 8 weeks of severance pay, who is really benefitted by that arrangement?  At a minimum, you need to be aware of these pitfalls and, ideally, negotiate them completely out of the Severance Agreement.   

Losing a job is a difficult and stressful time, and you should not have to waste time worrying about whether you are being treated fairly when it comes to a Severance Package.  Contact the severance agreement attorneys at Abney Law and let us guide you through this uncertain time and get you the most favorable severance package possible.