Deciding to sign an employment contract like a severance agreement isn’t always an easy decision. Your employer will expect something in return for providing severance pay or other benefits, but how do you know whether you’re getting a good deal?
Most often, to get those benefits, you’ll have to agree to a general release, which waives any legal rights you may have against your (former) employer. Your severance agreement may also contain restrictive covenants like a noncompete agreement, making it harder for you to find a similar job within the same geographic area.
To make matters more complicated, severance agreements and the laws that govern them vary from place to place. In Virginia, employees have a number of special considerations that can have a positive or negative impact on their bargaining power during the severance agreement negotiation process. Before signing a severance agreement in Virginia, keep the following points in mind.
1. You Have Additional Protections From Employment Discrimination
The major federal employment discrimination law is Title VII of the Civil Rights Act of 1964 (Title VII). Title VII bans employers with 15 or more employees from discriminating against employees based on the following characteristics:
- race,
- color,
- religion,
- sex,
- national origin, and
- pregnancy (through the Pregnancy Discrimination Act of 1978).
Virginia has a similar law of its own, the (VHRA). In addition to the above protected characteristics, the VHRA also protects employees from discrimination on the basis of marital status. In addition, the VHRA applies to smaller employers: those with between 6 and 14 employees. (Larger employers in Virginia are still subject to Title VII.)
Therefore, the VHRA provides additional protections against discrimination and applies to more employers than federal anti-discrimination laws, such as Title VII. This means that if you are subject to unlawful discrimination under Virginia law, you may have more leverage during severance negotiations than you would otherwise have under federal anti-discrimination laws.
2. You May Receive Lower Damages If You Sue Your Employer
One way to improve your severance package is to have a potential claim for unlawful discrimination against your employer. Not only can this type of lawsuit cause headaches and embarrassment for the employer, but it can result in hefty monetary damages.
The exact amount of potential monetary liability will depend on the law the employee relies on in the potential lawsuit. Anti-discrimination laws have specific sections that outline what kind of damages the employee can recover as well as any caps on the total recoverable amount.
Many federal anti-discrimination statutes allow employees to recover punitive and compensatory damages in addition to backpay, interest, and attorneys’ fees. Unfortunately, the VHRA limits any damage award to backpay, plus interest and attorneys’ fees.
This means that if you rely solely on the VHRA in a discrimination lawsuit against your employer, a major aspect of a potential damage award (compensatory and punitive damages) will not be available. This reduces your potential recovery and may result in your employer being more likely to risk litigation—which means a lower offer in the severance agreement.
3. You Are Subject to Virginia’s Trade Secret Protection
Most severance agreements will contain a nondisclosure clause (also known as a confidentiality agreement) that prevents employees from disclosing certain information they learned during the course of their employment, such as trade secrets.
In the slim chance that your severance agreement is silent on maintaining company secrets, you shouldn’t consider that a green light to use any trade secrets you learned for your own or your future employer’s advantage.
First, even if you aren’t subject to a nondisclosure clause in your severance agreement, there’s still a good chance you signed one when you first started work. Second, Virginia has a law called the Uniform Trade Secrets Act that protects trade secrets regardless of what your employment contracts say. One way or another, you will be legally required to protect confidential trade secret information.
4. You Should Beware Any Admissions of Wrongdoing
Generally speaking, employees who are contemplating whether they should sign a severance agreement will also be looking into unemployment benefits. In Virginia, as is the case with most states, not every employee who loses a job will be eligible to receive unemployment payments.
For instance, Virginia will not pay unemployment benefits to a former employee who was fired for misconduct or who resigned without good cause. If you are resigning without good cause or being fired for a reason that might make you ineligible for unemployment, watch out for language to that effect in your severance agreement.
5. Virginia Courts Will Enforce Waivers and Restrictive Covenants
Courts tend not to like contracts that restrict an employee’s ability to switch jobs or require an individual to give up his or her legal rights. However, such provisions, such as waivers, noncompete, and nonsolicitation clauses, are enforceable in Virginia, subject to certain limitations. For example, most courts will not enforce a general release that prevents an employee from filing a complaint or charge with an agency tasked with enforcing anti-discrimination laws, such as the Equal Employment Opportunity Commission (EEOC).
When it comes to restrictive covenants, like noncompetes and nonsolicitation agreements, they must be written as narrowly as possible. In other words, the economic restrictions on the employee must be as minimal as possible while still protecting an employer’s valid economic interests.
Need more information about what a severance agreement looks like in Virginia? Take a look at our Virginia Model Severance Agreement.
For More Information
Do you still have questions about severance agreements? Need help applying this information to your own severance agreement? Please feel free to contact our office to discuss your specific situation with an experienced Virginia employment attorney.
