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Eight Things to Think About When Negotiating a Severance Agreement

| May 14, 2021

A severance package can be a lifeline for those who are suddenly facing the prospect of unemployment, but it is much more than your severance pay. Unfortunately, many people simply sign the agreement without realizing that they are giving away important rights. It is important to understand that regardless of why you are being let go from your job, a severance agreement isn’t always a take-it-or-leave-it proposition. Before signing your severance agreement, a Maryland employment attorney can review it for potential issues and even help you negotiate more favorable terms. 

Confidentiality

Employers typically want the severance agreement to be kept mutual. This makes sense, as they don’t want other employees to know what was included in your agreement. If your severance agreement contains a confidentiality clause, it should be mutual. This way, they are prohibited from disclosing the agreement or its terms to your former colleagues or prospective employers. 

Non-Compete Clauses

If your employment agreement doesn’t already contain a non-compete clause, your employer may attempt to insert one into your severance agreement. In other cases, they may try to insert a more onerous clause than the one in your original employment agreement. In either case, a Maryland employment attorney can review the non-compete clause and provide advice as to whether it is fair or if it is even enforceable. 

Non-Solicitation Clauses

Your employer may also try to prohibit you from soliciting other employees, customers, or clients to follow you to your new employer. In some ways, a non-solicitation clause can have the same effect as a non-compete clause. A Maryland employment attorney can review this clause and help you understand what implications it carries for your future employment opportunities. Then, if necessary, they can negotiate a better solution so that you aren’t unfairly limited in your new job. 

Non-Disparagement Clauses

Non-disparagement clauses prohibit you from making derogatory statements or other negative remarks about your former employer. Unfortunately, these provisions are often overly broad and easy to breach. Your Maryland employment attorney can negotiate a non-disparagement clause that is not only fair but also mutual.

Release of Liability

Unsurprisingly, your employer will want you to release them from any potential legal claims that you may have against them. As a threshold concern, any release of liability should be mutual. 

That said, the extent to which either party is releasing the other should be given careful consideration. For example, if you have potential claims against your employer related to discrimination or unpaid wages, you do not want to simply release these claims. While potential claims may make it impossible to enter into a severance agreement, they can be powerful negotiating tools that you can use to leverage the best possible severance agreement. 

On the other hand, certain industries may require your employer to retain the right to potential claims. For example, if you work in the financial industry, your employer may want to retain the right to pursue legal action for embezzlement or other crimes that have not yet been discovered. A Maryland employment attorney can help you navigate these issues to ensure that your rights are protected. 

Health Insurance

Most people receive health insurance through their employer and losing that insurance can be one of the most painful aspects of losing your job. And while employers are required to extend health insurance benefits for up to 18 months under COBRA, former employees are often expected to pay the premiums. If your employer wholly or partially subsidized your premiums, these payments can be an unpleasant surprise. However, depending on the circumstances surrounding your termination, a Maryland employment attorney may be able to negotiate payment of your insurance premiums as part of your severance agreement. 

Retirement Plans, Pensions, and Stock Rights

Your compensation plan may have included stock options, a pension, 401K contributions, and other non-cash forms of compensation. Your severance agreement should address these items, and you should make sure you are not surrendering any important rights. 

Vacation or Personal Time Off (PTO)

Your severance agreement should also include payment of any vacation or PTO that you have accrued but not used. This is a common detail that is often overlooked, but you may be entitled to payment for any accrued leave. 

Presented with a Severance Agreement? Talk to a Maryland Employment Attorney Before Signing

Your severance agreement is an opportunity to leave your employment on your own terms. At the Law Office of J.W. Stafford, we can help you understand what is and what isn’t covered by your severance agreement so that you can make a truly informed decision about this next chapter in your life. And as tough negotiators, we can make sure you get a fair severance and that your rights are fully protected. To discuss your severance agreement with an experienced Maryland employment attorney, contact us today at 410-514-6099.