Severance agreements are contracts executed by a company and a departing employee at the time of the employee’s termination, separation, or retirement. These agreements can significantly alter the rights of both parties to the agreement. With the complexity of New Jersey employment laws and contractual language, it is imperative to consult with a knowledgeable employment lawyer prior to signing a severance agreement.
Severance agreements, also known as employment termination agreements, separation agreements, or release agreements, outline the rights and responsibilities of both employer and employee if the employment relationship is ended. Companies routinely present severance agreements to employees who are being laid off or terminated. The company will typically offer the employee a lump-sum payment in exchange for a release of any and all legal claims that the employee may have against the company. These claims would include discrimination, retaliation, breach of contract, whistleblower actions, and any other conceivable legal claim that might arise between the parties either in the past or into the future.
Severance agreements can also include confidentiality clauses providing that the employee will not disclose the circumstances leading up to their discharge. They can also include or non-compete clauses requiring a former employee to refrain from working for competitors in the same geographic area where the employee formerly worked. Employment separation agreements can also provide that an employee will renounce any claim to intellectual property developed during the time that the employee worked for their former company. Additionally, an employee release agreement might include a non-disparagement clause prohibiting the employee from making negative statements about the company after their employment relationship has ended.
There are number of key factors you should evaluate before signing a severance agreement. Some of the most significant questions you must consider prior to accepting a severance package or employee separation agreement are outlined below.
However, there are limits to this “at-will” system, which are set forth in New Jersey and federal laws that protect workers against discrimination and retaliation. New Jersey and federal laws including the NJ Family Leave Act, federal Family and Medical Leave Act, NJ Law Against Discrimination, NJ Conscientious Employee Protection Act, and NJ Workers’ Compensation Act, all provide exceptions to the “at-will” system.
If you are terminated by your employer and said termination is in violation of any public policy governed by the state or federal government, you have grounds to pursue a wrongful termination lawsuit.
Is the company offering you an agreement and a lump-sum payment because you have a potential legal claim against the company? If you were the victim of harassment, retaliation, discrimination, or unlawful workplace practices, you absolutely consult an employment lawyer prior to releasing your legal claims against the company. You may have grounds for an employment lawsuit to obtain greater compensation.
If you and your company are engaged in a dispute over who owns certain intellectual property, you should likely consult an intellectual property lawyer prior to signing any release. If the severance payment offered is much lower than the value of a potential settlement or legal judgment in your favor, you should likely forgo the agreement and pursue your claims in court.
Will signing the severance agreement prevent you from obtaining a new job? Non-compete clauses and restrictive covenants can often make it difficult to work in your chosen field or in the geographic area where you live and used to work. Confidentiality clauses can also be a thorny issue for employers given that you may mentally retain intellectual property from your former job—you may subject your future employer to legal liability if you make use of that same intellectual property moving forward, whether that use is conscious or not. You should carefully consider whether the compensation you are being offered in the severance agreement outweighs any adverse career consequences moving forward.
Finally, you should consider whether you can negotiate the terms of the severance agreement in your favor. Employers will normally draft the initial version of a termination agreement to their benefit and it is up to you to enlist an advocate with the knowledge and legal insight to represent your interests. Most companies have attorneys or an entire legal department who can make sure they get the best outcome. This is why it is essential to seek counsel from your own employment lawyer before making any decisions. Your attorney can push back on particularly restrictive terms or even negotiate a higher severance payment on your behalf.
Severance Agreement Specialists