When facing a severance agreement, you might find yourself confronting a thicket of legal complexities. A severance agreement can have far-reaching implications for your financial well-being and future professional endeavors, so it’s important to understand the document before signing it. Here at Cunningham Law, we’re committed to helping you navigate the intricacies of your severance agreement. Let’s break down the ten key elements you need to pay attention to.
1. Severance Pay
The cornerstone of most severance agreements is the severance pay. It’s typically based on your tenure and salary at the company. However, there isn’t a one-size-fits-all rule. The severance pay formula can vary depending on the organization and the circumstances of your termination. Ensure that the agreement spells out not only the amount of your severance pay but also the schedule for its distribution. Understand if it will be paid in a lump sum or regular installments, and when you should expect to receive it.
2. Reason for Termination
Why your employment was terminated is more than a matter of personal significance; it can influence your eligibility for unemployment benefits and how you answer questions in future job interviews. It’s crucial that your severance agreement clearly outlines the reason for your termination. If the reason given is vague or misleading, it may be worth discussing this with your employer or seeking legal counsel.
3. Non-disparagement Clause
A non-disparagement clause, if included in your severance agreement, prevents you from making negative remarks about your former employer. It’s there to protect the company’s reputation. But it’s vital to ensure that this clause is reciprocal. The company should also be restrained from disparaging you publicly, which could harm your professional reputation and impede your job search efforts.
4. Non-compete Clause
Non-compete clauses restrict your ability to work for a competitor or start a similar business for a designated period after leaving the company. This is meant to protect the company’s trade secrets and client relationships. However, an overly restrictive non-compete clause can unduly limit your career opportunities. Make sure the duration, geographic scope, and definition of “competitor” are reasonable and won’t stop you from continuing your career in your chosen field.
5. Benefit Continuation
Severance agreements often address what happens to your benefits upon termination. These can include medical, dental, and life insurance benefits, among others. Your agreement should specify whether these benefits will continue for a set period after termination or if you’ll receive a payout instead. Keep in mind that a sudden loss of benefits, especially health insurance, can be a significant financial burden.
6. Outplacement Services
Some employers provide outplacement services as part of their severance packages. These services, which can range from resume writing and interview coaching to job placement assistance, can be an invaluable resource in helping you transition to a new job. If offered, these services can supplement your severance pay and provide practical assistance during your job hunt.
7. Stock Options and Retirement Accounts
If you’ve been granted stock options or have a retirement account through your employer, these should be addressed in your severance agreement. The contract should clarify how much time you have to exercise any stock options. It should also outline any potential impacts on your retirement accounts, including whether you can roll them over into a private account.
8. Confidentiality Clause
Many severance agreements include a confidentiality clause, which requires you to keep the terms of the agreement secret. This clause can extend to the circumstances of your termination and any company information you learned during your employment. Before signing, be clear about the extent of this confidentiality clause and its duration.
9. Release of Claims
Often, in exchange for the severance package, the agreement will require you to waive any potential legal claims against the company. This could include claims related to wrongful termination, discrimination, or breach of contract. It’s important to be aware of what rights you’re giving up in return for your severance package.
10. Re-employment Potential
Lastly, some agreements may state you’re ineligible for rehire. While it might seem unimportant now, it’s worth noting for future career considerations. Our legal team can help you navigate this stipulation.
Severance agreements are legally binding and each clause is significant. At Cunningham Law, we have a keen understanding of California labor law and are prepared to help protect your rights and ensure your agreement aligns with your best interests. Contact us for a consultation to guide your next career steps.
Remember, while this guide is comprehensive, it doesn’t substitute for legal advice. Our team at Cunningham Law offers personalized guidance tailored to your specific situation and severance agreement. With our support, navigating the legal aspects of your career transition can be more manageable. Contact us to ensure a smooth and advantageous transition for your career.
