If you were recently laid off or are getting laid off soon, you’re probably interested to know what’s in the severance agreement. This article explores what to expect when reviewing your own agreement.
What is Severance?
At its core, severance is an agreement between a company and its employee to pay a certain amount of money in case that employee is laid off or terminated without cause. You get money and the company covers itself against lawsuits and unemployment claims.
Is Severance Mandatory?
No. Severance is not mandatory in most cases. Some states have requirements when there’s a large layoff, but North Carolina does not. Severance arises from contract law. Your employee handbook or employee contract has to specify that you are entitled to severance.
First and foremost, you want the money. That’s the only reason you’d consider signing a severance agreement. If they’re just going to fire you, why sign anything at all? The most common question I get is “what’s a standard practice for amount?” Unfortunately, there is no standard practice when it comes to severance payments. That’s up to the company policy. Some states, but not North Carolina, require a
The company cares most about their liability. Usually, their main goal is to eliminate as much of it as possible when you leave. Therefore, you’ll likely see a series of waivers. Most commonly, you’ll waive any right to unemployment, to sue them for any past employment issues, and to join in any class action against them.
I personally would include provisions about non disparagement and a waiver of any rights to ownership of intellectual property or any part of the company’s property.
Note about the unemployment claim: You may still qualify for unemployment if your severance is less than how much you are entitled to through unemployment. Be sure to double check this before agreeing to anything.
Reiteration of Certain Contractual Obligations
If you have a nondisclosure, non-compete, non-solicitation, or some other covenant, your severance agreement likely reiterates these provisions. It’ll likely also share information about when certain benefits expire and when you have to exercise stock options if you have them.
Most severance agreements contain a nondisclosure provision preventing you from discussing the lay off or how much payment is. As long as they don’t stifle your ability to discuss with law enforcement or exercise your right as a whistleblower, these are perfectly legal.