Ending an employment relationship can be difficult, regardless of whether you are the employer or the departing employee. Severance agreements can be an effective way to ease this transition and allow both sides to make a clean break. But there are some important things to understand about severance agreements for both parties.
What Employers Should Know
Connecticut law does not require employers to offer severance packages, but many choose to do so anyway, particularly for higher-level employees who are being terminated or laid off for reasons other than poor performance or violation of company policy.
The most common reason to offer severance is to protect the company against the possibility of future litigation or PR problems. Most severance agreements specify that in exchange for the benefits offered, the employee agrees that he or she will not attempt to sue the company for any reason, including wrongful termination, sexual harassment or discrimination. The employee also agrees not to publicly disparage the company.
Of course, there are other reasons why you might offer severance packages, including as a sign of good will. But if you are asking for something like release of liability, your agreement needs to offer the departing employee compensation (also known as consideration). Otherwise, the waiver of liability may be deemed invalid.
As always, it is a good idea to consult with an attorney if you feel that an employee has violated a severance agreement or is trying to negotiate terms you consider unreasonable.
Commonly included provisions in severance packages
These agreements are customizable, and the specific provisions may depend on what set of circumstances led to the employee’s departure. Here are some provisions that are commonly included for employees leaving on amicable terms:
- Continuing pay for a period of time after ending employment
- Continuing work-sponsored health insurance benefits for a set period of time after ending employment
- Agreement to write letters of recommendation or a guarantee to speak well of the employee when contacted as an employment reference
- An agreement not to contest unemployment benefits
- Release from certain employment contract provisions such as non-compete agreements
What departing employees should know
If you are being offered a severance package after being asked to leave your job, you should know that you may have the opportunity to negotiate the terms. It is important to read the agreement carefully and consider whether what you are being offered is a fair trade for giving up your right to sue the company.
If you believe that the compensation offered is too low or that you have reasonable grounds on which to pursue a lawsuit (based on your workplace experiences), you’ll need to be prepared to advocate for yourself and negotiate for more generous compensation. Your other option is to reject the severance agreement and pursue litigation instead.
The other thing to keep in mind is that your employer needs to give you enough time to fully consider the agreement before signing or rejecting it. Ideally, you will consult with an employment law attorney when making such an important decision. He or she can advise you on whether the terms are fair and whether you might be better off pursuing litigation (if you believe you have grounds to do so).
Both employers and employees have the opportunity and responsibility to advocate for their best interests in severance agreement negotiations. To that end, it is always wise to seek the advice of an experienced attorney.