What Is In A Severance Agreement?
Our attorneys will fight for fair compensation
When your employment is terminated, you may be asked to sign a separation agreement that is designed to protect the employer. In exchange, the employer offers you a severance agreement (or severance package). This provides you with a certain amount of pay and benefits as you look for new work.
The employment attorneys at Gibson Law, LLC used to represent employers in matters involving separation and severance. We know how employers approach these types of agreements. Now, we use our experience and legal knowledge to help employees get the severance they deserve during this time of transition.
What is typically in a severance agreement?
This is compensation given to an employee after the termination. It provides financial support for a certain amount of time while the former employee looks for a new job. This may be paid as one lump sum or as a series of payments.
Unused vacation and sick time
Depending on the terms of employment, an employee may receive compensation for vacation and sick time that was accrued but unused at the time of termination.
An employer may agree to pay for your medical benefits for a certain amount of time following your termination. After that, you are able to pay for the same coverage through the Consolidated Omnibus Budget Reconciliation Act (COBRA) for a period of up to 18 months (longer in certain situations).
Retirement plan options
If you are invested in an employer-sponsored retirement plan, such as a 401(k), the severance agreement will outline your options. You may be able to keep money in the plan but won’t be able to make any further contributions. Or you may be able to roll over money into an IRA.
The agreement will also list your options if you participated in an employee stock option plan (ESOP). Vesting periods apply and there are usually specific conditions for distribution.
Many employers agree to pay for these services with an outplacement firm to help employees find a new job. These services often include training, career assessment, one-on-one counseling and access to online tools and resources.
When employees are presented with separation and severance agreements, they may still be processing the shock of learning their employment has been terminated. They may not give much thought to the severance that has been offered. Some simply sign the agreements, thinking that’s the best offer they can probably get.
It is important to talk to an experienced employment lawyer to make sure you are being treated fairly. While employers are not required to offer severance, they do have an interest in protecting themselves from any potential future legal action. Because of this, severance agreements are often negotiable.
If your employment is being terminated and you have been asked to sign a severance agreement, we can help. Contact us for a consultation with a member of our legal team at our Cincinnati or Dayton office.