You’re Fired… now get out… oh but wait… please sign this Severance Agreement

CHALFONT, Pa. - Aug. 18, 2014 - PRLog -- The idea behind a severance agreement is that an employee agrees to take something of value to which he/she is not otherwise entitled — additional compensation, continuation of benefits, or other “in kind” consideration — in exchange for agreeing not to sue the employer.

An employee determined enough to sue his/her employer will do so, and the company will end up spending a good amount of cash defending even a meritless claim by an employee who is terminated.

That’s where the severance agreement comes in.

A severance agreement that includes a full release of claims is the only way an employer can stop the HOPING APPROACH and be reasonably sure it won’t be dealing with the terminated employee again. Of course, peace of mind has a price.

When should an employer offer an employee a severance package?
The risk factors of firing or laying off an employee need to be evaluated to determine whether a severance agreement is worth the expense.

·         Is the employee in a protected category under an EEOC Employment law (e.g. Age 40 or older)?

·         More significantly, is he/she likely to be replaced by someone not in the same protected category?

·         Has the employee recently engaged in protected activity such as taking a Leave of Absence (FMLA), filed a workplace injury claim (Workers Compensation), or met with HR to report an issue?

·         Is there an employment agreement in place?

·         Is the employee privy to confidential trade secrets or intellectual property of the Company?

When any of these above factors are involved, a release of claims may make sense and minimize the employer’s risks of dealing with a wrongful termination claim. The triggering event that led the employer to decide to terminate the employee should also be taken into consideration.   For example, it’s probably not beneficial to offer a severance agreement to an employee who was caught stealing, engaged in insubordination or committed some form of harassment/sexual harassment, even if he/she is in a protected class or seems like a high risk to sue. Reason:  If it becomes known that employees who engage in egregious behavior are essentially “paid off” on their way out the door, overall workplace conduct and employee morale are likely to be affected.

Other considerations when offering a severance agreement
Employers can’t force employees to sign a  severance agreement. All an employer can do is offer a severance agreement. However, simply presenting an agreement can prompt an employee to view his/her employment relationship in a whole new light.  An employee who never had a thought about filing a claim against their employer may start to think about things differently once he/she sees the agreement. He/she may look at the list of claims in the release and wonder if any apply to him/her. He/she may wonder why their employer went through all of the trouble to pay an attorney to draft such a nice, official document if they weren’t worried about something.

Also, for the severance agreement to be enforceable, the employee must be given a reasonable amount of time to review it and seek counsel if desired.   This “reasonable” amount of time can be up to 45 days!

Before an employer provides a terminated employee with a severance agreement, we recommend that they consult with McCloskey Partners, LLC to ensure they are covering all bases.  Feel free to contact us at 215-716-3035 or admin@mccloskeypartners.com