Five Mistakes to Avoid When Signing Your Severance Agreement

Severance Agreement
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If you’re leaving your job, you may be asked to sign a severance agreement. In broad terms, a severance agreement is an employment contract where both you and your employer exchange something of value when you leave your employment.

For example, you may receive severance pay in return for a promise not to sue your employer for creating a hostile work environment or allowing you to be harassed. In a perfect world, the terms of the severance agreement would be fair to both sides.

But the harsh reality is that most severance agreements are more advantageous for the employer. Therefore, before you sign a severance agreement, you should be aware of the following common mistakes that departing employees make.

Mistake #1: Assuming You Have No Leverage

Employees usually have more leverage than they think. Employers don’t want their departing employees to bring negative attention to the employer, and social media makes that much easier to do than it used to be. Even if you could never successfully sue your employer in a court of law, it wouldn’t take much for your former employer to lose out in the court of public opinion. Your employer wants to keep you at least happy enough not to slam the company publicly; that’s leverage.

Mistake #2: Not Negotiating

Because they assume that they have no leverage, many employees don’t try to negotiate the terms of their severance agreements. While it’s true that the employer has the stronger bargaining power in many situations, this doesn’t mean employees have no room to negotiate.

Not all severance agreements are negotiable, but it rarely hurts to ask. Remember, there’s a reason your employer is asking you to sign a severance agreement: you have something your employer wants. At least try to negotiate so you get the most you can in exchange for what you are giving up.

Mistake #3: Not Understanding Everything That’s Included in Your Severance Agreement

Many employees sign their severance agreements without even attempting to fully understand their terms. Perhaps they’re intimidated by the big paragraphs and small print. But if those employees were to sit down and take a minute to carefully read what they’re asked to sign, they could learn a lot about what they’re getting and what they’re giving up.

If you fully understand what your employer wants you to agree to, you may choose not to sign your severance agreement—or you may at least try to negotiate for better terms. If you don’t know what a certain provision in the contract means and you can’t figure it out, it may be time to consult with a lawyer.

Mistake #4: Not Consulting With an Attorney

This is a big mistake that lots of employees make. We’re not saying an employee should automatically hire an attorney to read over a severance agreement and explain it. If an employee doesn’t believe he or she was the victim of unlawful behavior by the employer, or if the terms of the severance package are relatively small, it may not be worth the comparative cost of hiring an employment attorney.

But if you believe you are the victim of your employer’s illegal conduct, or if your severance package includes a significant amount of severance pay and benefits, it is probably worth reviewing your agreement with an attorney. Otherwise, you may forgo adequate compensation or give up significant legal rights without knowing it.

Even if you have no intention of filing a lawsuit against your former employer, an employment attorney can help you negotiate a better severance agreement. Further, the attorney may identify legal options that you (and maybe even your employer) didn’t know existed.

Mistake #5: Not Taking Enough Time to Think Before Signing

Employees should be given a reasonable amount of time to review a severance agreement before being asked to sign it. This includes providing an opportunity for the employee to review the proposed agreement with an attorney.

In certain severance agreements, such as those that contain a release of a potential age discrimination claim, the law requires that the employee have at least 21 days to review the severance agreement before signing it.

For More Information

Do you still have questions about severance agreements? Need help applying this information to your own case? Please feel free to contact us to discuss your specific situation.

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