The Legalities of an Employment Severance Agreement

Sometimes, at the end of one’s employment or termination from work such as a lay-off, an employer may offer a severance agreement. An employment severance agreement is a contract between an employer and an employee which is basically a separation agreement general release and covenant not to sue.

While a severance agreement is often perceived as a “gift”, indeed, this provides additional monetary compensation or benefits aside from the employee’s existing entitlements at the end of his employment – this kind of legal agreement is advantageous to the employer.

Many employers offer departing employees money or benefits through a severance agreement to reduce the risk for potential litigation. Generally, in exchange for money or benefits, the employee waives liability for all claims connected with the employment relationship such as including discrimination claims enforced by the Equal Employment Opportunity Commission (EEOC) as well as wrongful termination complaints.

Thus, once an employee signs the agreement and receives the above-mentioned consideration, it is legally binding. However, if you felt you were coerced into signing the severance agreement or is violative of the state or federal laws – you can contest the contract.

Here’s a few things you need to know about what makes an employment severance agreement legal and valid:

• Generally, severance agreement is considered valid if an employee “knowingly and voluntarily” consents to the waivers in the agreement.
• Further, to be considered legally binding, the following elements must concur:
• There is some sort of consideration in exchange for the employee’s waiver of the right to sue
• It should not require the employee to waive future rights
• Follows the applicable state and federal laws
• Also, take note that legally, an employer cannot deprive or limit your right to testify, assist, or participate in an investigation, hearing, or proceeding conducted by the EEOC or prevent you from filing a charge of discrimination with the agency.
• Further, in the event that you filed a claim inspite of the waiver in your severance agreement, your employer also cannot lawfully require you to return the money or benefits it gave you in exchange for the waiver of your right to sue.

Bear in mind too that under certain laws, such as the Age Discrimination in Employment Act (ADEA) that impose certain requirements for a valid waiver in a severance agreement. For example, under ADEA, in order to be legally binding, it must be:

• In writing and understandable to the parties
• Specifically refer to ADEA rights or claims
• Not waive rights or claims that may arise in the future
• Not in exchange for valuable consideration in addition to anything of value to which the individual already is entitled
• There must be an advise the individual in writing to consult an attorney before signing the waiver

Severance agreements are not simple contracts, this is why whether you are an employer or an employee, it is important for you to understand the legalities or have the services of California labor lawyer to help you understand the rights and obligations of a severance agreement.