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Severance agreements outline the terms of an employee’s termination or departure and typically provide employees with some benefits. Although not required, many employees may offer severance packages to their employees to provide some assurance that they will have financial protection if they lose their jobs. Employers may also offer severance agreements if they need to unexpectedly layoff a good employee or want to avoid a potential conflict with an employee they plan to terminate for misconduct or negligence.

Before agreeing to the terms of a severance package, consider having one of our Virginia severance agreement lawyers review it. Our experienced employment attorneys at The Spiggle Law Firm work to ensure employees are offered fair terms and are not taken advantage of.

Types of Severance Agreements

Severance agreements may be used in situations including but not limited to:

  • Layoff
  • Termination
  • Retirement
  • Resignation

They may provide employees with a financial benefit such as a lump sum payment or an ongoing income stream to help support an employee once they leave their current position. In addition to money, severance packages may include the continuation of other benefits such as health insurance. Severance agreements could also contain restrictive terms such as non-compete or non-solicitation agreements.

More complex severance agreements may require ongoing administration and installment payments, while others may consist of a single lump sum payment. The value of a severance package may be determined at the employer’s discretion or it may be more formally calculated based on an employee’s length of employment and compensation.

Waiving Your Rights in Virginia Agreements

As a condition of receiving a severance package, employees may also be required to waive any potential claims against their employer. This shields employers from potential lawsuits arising out of the circumstances surrounding an employee’s termination. If you think you may be giving up crucial civic rights, do not hesitate to consult with our Virginia severance agreement lawyers.

Severance agreements often require employees to waive their rights to make legal claims of discrimination against their employer. In order to be valid, waivers of claims under anti-discrimination statutes must be made knowingly and voluntarily. Additionally, waivers must not extend to potential future acts of unlawful discrimination.

Employee Retirement Income Security Act (ERISA)

ERISA is a federal law that applies to employee benefit plans. In some instances, a severance agreement may qualify as a benefit plan under ERISA. If a severance agreement is subject to ERISA, it must comply with this legislation.

Whether a severance agreement is governed by ERISA depends on its stipulations. Agreements under ERISA are usually ongoing and involve a series of payments as opposed to a lump sum. When severance agreements are not properly administered under ERISA, employers can be liable for this violation of contract. A Virginia severance agreement lawyer could help you hold your employer liable for said violations.

Getting in Touch with a Virginia Severance Agreements Attorney

Our Virginia severance agreement lawyers are prepared to review, and if necessary, negotiate and challenge your severance agreement. We want to make sure you are receiving the representation you need to get you the most favorable results possible. If you have a potential severance case based on discrimination, you can calculate your its value here. To schedule your consultation or to have your severance agreement reviewed by The Spiggle Law Firm, click here.

What is a Severance Agreement?

A severance agreement is a contract between an employer and departing employee where they each exchange something of value to each other. Generally, the employer gives cash and employment-related benefits to the employee while the employee gives the employer certain promises, such as not to sue the employer and maintain the confidentiality of information learned while on the job.

Severance agreements are not to be confused with severance packages. With severance packages, there is no contract and the employee receives the money or benefit with no strings attached.

Elements of a Severance Agreement

The exact provisions of a severance agreement will depend on a number of facts surrounding the employee’s departure. However, severance agreements have two primary sections, one that benefits the employee and one that benefits the employer.

The portion of the severance agreement that helps the employee can include any of the following:
  • Payment Payment
    Payment Payment
  • Benefits Benefits
    Benefits Benefits
  • Unemployment Unemployment
    Unemployment Unemployment
  • References References
    References References
  • Obligation Obligation
    Obligation Obligation
Payment

Lump sum or multiple cash payments. Receiving two weeks, one month or three month’s salary, usually in one lump sum check, is the most common wait to be paid out from a severance agreement.

Benefits

Even though COBRA allows employees to continue receiving the health insurance benefits they had through their former employer, COBRA does not require employers to pay for those benefits. A severance agreement might pay that cost for a specific period of time.

Unemployment

A promise not to oppose the employee’s unemployment benefits. Before an employee can collect unemployment benefits, the former employer must first confirm with the unemployment agency that the employee is eligible to receive them. A severance agreement that contains this promise means it is much more likely the employee will receive unemployment payments.

References

Most likely the employee will want to look for another job. Future employers are bound to wonder about the employee’s experiences at their most recent job. Having a former employer promise to say nice things to future employers can make finding a new job much easier.

Obligation

Exemption for another contractual obligation. As a condition of employment, many employees are required to sign employment agreements. This can include a noncompete or nonsolicitation agreement. Depending on the nature of the employee’s profession, not being bound by one of these agreements can be the most valuable benefit in a severance agreement.

Benefits Are Not Free

As explained earlier, these benefits are not free in a severance agreement.
Employers are expecting something return. Most often, the biggest thing an employer wants is a release.

Within the context of severance agreements, a release is where the employee gives up certain legal rights they may have against the employer. These rights usually include legal claims against the employer, such as discrimination, wrongful discharge and breach of contract. If the basis for the employee’s departure is questionable, the release is probably the most valuable benefit for the employer. A nondisparagement clause is another provision often found in a severance agreement. If an employee has embarrassing information about the former employer, especially concerning the reason for the employee’s departure, it is understandable that the employer will try to buy the employee’s silence.

Employees reading a severance agreement should not be surprised if they see additional provisions in the severance agreement, including:

  • Noncompete clause
  • Nonsolicitation clause
  • Confidentiality clause

Spiggle Law For More Information

If you would like to learn more about severance agreements, please enter your e-mail address. We will send you our 12-part series that goes into greater detail about severance agreements and how to negotiate them along with access to sample Severance Agreements for Maryland, Virginia and Washington, D.C.

Why Severance Agreements Exist

In many situations, the purpose of a severance agreement is to immunize the employer from any legal claims in return for cash and/or other benefits. From a cynical point of view, an employee might think an employer only requests a severance agreement when the employer did something wrong. But this is not always true.

In some cases, the employer simply wants to move on without worrying about a future lawsuit from the employee. Even though the employer knows any lawsuit would be baseless, it can still be expensive to fight. To avoid this uncertainty, the employer may request the employee sign a severance agreement that contains a release.

Getting Legal Help

The assistance of an employment law attorney who understands the ins and outs of severance package laws, wrongful termination laws and employment discrimination can be extremely helpful when deciding how to proceed with a severance agreement.

For instance, a wrongful termination attorney can ensure the employee is not giving up any significant rights. If they do choose to give up certain rights, the attorney can make sure the employee receives fair compensation in return. The wrongful termination attorney can assess the merits of any potential lawsuit employee might have, including its potential settlement value.

An attorney can also help employees during negotiations and do so in a way that will not harm the employee’s bargaining power. But the biggest benefit of consulting with an attorney is identifying unknown red flags. Remember the old saying: You do not know what you do not know. It is important to have a complete understanding of the situation before signing away your rights.

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