Sample Severance Agreements - Know the risks before just hitting print and filling in the blanks or using an old agreement
Don't get me wrong - form agreements can be a terrific resource but in the employment law context they are not one size fits all. When used incorrectly, form agreements can also be very dangerous and have disastrous consequences. Over the years, I have meticulously prepared hundreds of employment agreements, severance agreements and other employment-related agreements for specific client needs but still am surprised at how often some businesses will use an old agreement or sample agreement online (from who knows what site) for a different purpose without realizing the risks associated with doing so. This blog post briefly describes some of the most common errors when using a template agreement - before you take any employment-related action, companies should contact experienced employment law counsel to learn specific legal obligations to ensure all steps taken are in accordance with the law. Our award winning employment law attorneys have advised and counseled many businesses regarding a range of workforce related matters including severance agreements and issues related to separation. Contact our office if you would like to discuss a specific legal issue and how to best protect your rights and interest. As the examples below demonstrate, it is critical to speaking to an experienced employment law attorney before you take any decisions.
1. Outdated or inapplicable Law: Employment law is a constantly changing area of the law where new court decisions and governmental positions are issued on a frequent basis. These decisions can affect the validity of the agreement, in full or in part. It is not a safe assumption that an old agreement is current and contains all of the legal requirements. If you are going to provide severance pay in exchange for a release of claims, you should get what you bargained for and expected - not an ineffective agreement or invalid clause. Second, it is not wise to use an agreement that was prepared for an employment situation in a different state or a different scenario. For example, a severance agreement drafted for an employee in New York may not contain all of the legal requirements for an employee in California. State laws vary and some states may require specific language and without this magic language - the full effect of your agreement may be compromised. In addition, in order to waive certain claims, specific language needs to be included and if the other agreement did not include it, you would not know it was necessary for your situation.
2. Not a fit for your organization: Not every employment-related statute applies to every company. For example, Title VII of the Civil Rights Act of 1964 which prohibits employment discrimination in certain protected categories generally applies to companies with twenty or more employees. Under certain situations, there is specific language required in a release agreement to include a waiver of a Title VII claim. Some companies have paid severance money to employees pursuant to a poorly drafted agreement only to have the employee sue them later because the release agreement was not effective. I don't have to tell you that is a disaster - you have now in essence funded the employee's lawsuit against you. Not ideal.
3. Does not fully consider impact on non-compete and confidentiality agreements previously signed by an employee: If an employee signed a non-competition agreement, ideally, an agreement should mention that all obligations in that agreement remain in effect. A form or old agreement may neglect to do so and may in fact do the opposite and negate the non-compete provision by including a clause that states the severance agreements contains all understandings and obligations regarding the employee. This could effectively eviscerate the employee's non-compete obligations if not done properly.
The above examples briefly illustrate the importance of speaking with an experienced employment law before you take any action so you can develop an appropriate action plan. You may think that using a form agreement or an old agreement could save you a few dollars but it could actually turn out to cost you much more including taking away your time from running your business.