5 Things You Should Know Before Signing That Severance Agreement


The Intrepid traveller

Question: “I feel that I am being discriminated against at my job. I have worked there for 20 years with no problems at all. In the last month I have been written up once for something that has always been done with no problems. Today I was confronted with a severance package. I am totally confused by all of this.

I have been repeatedly asked what my plans for the future were, when was I going to retire, etc. Now I am given this package and told that I should sign it and return it tomorrow. When I asked what I thought were very important questions because of the confusion in the writing of these papers, we still got conflicting answers. The bottom line is that if I do not sign and return them by tomorrow the threat of being fired with nothing at all has already been given to me. Please, please, help me make the right decision.”

This is a great question! I encounter many people who are presented with severance agreements and are pressured to sign right away. Unfortunately for the reader who wrote this question, he needed legal advice right away. This isn’t the right forum for that. As always, if you need legal advice for your specific situation, contact an employment lawyer in your state.

Still, I thought the question was worth exploring because it happens so often. The short answer is, never agree to quit your job unless you’re offered something substantial, like enough severance in a fair agreement that makes it worth your while to do so. The fact that the employer was pressing for a quick signature tells me that something was probably fishy about this agreement. Never, ever sign anything you don’t fully understand.

Here are some important things to consider when you are presented with a severance agreement:

1. Take your time: Because this reader is clearly over 40, he should have been given at least 21 days to review the agreement and take it to a lawyer before he signed. If he wasn’t given that time, then any release of age discrimination claims might not be valid. Of course, the agreement probably says he had that much time, and he’s acknowledging it if he signed.

If you’re being pressured to sign before you have a chance to properly review it, I suggest putting your request for more time in writing, by email, fax or some way you have proof you sent it. Put in writing that they have given you a deadline of x-date, that you want to take the agreement to a lawyer, and that you need another week or a few weeks to review it. If they deny the extra time, you now have it in writing.

2. Limits on your ability to work: Even if you didn’t sign a noncompete agreement while you were employed, some employers may try to sneak one into a severance agreement. If you’re signing an agreement that you can’t work for a competitor for a year or two after you leave, you’d better make sure you’re getting enough money to tide you over.

Some agreements ask you to affirm you will abide by an existing noncompete agreement. If you sign, you may be giving up some defenses you had to the enforceability of the prior agreement. Be careful, and make sure you can live with any noncompete restrictions before you sign.

3. Confidentiality: If you are agreeing to keep company information confidential, beware. Some management-side lawyers use provisions like this to say that, if you work for a competitor, you would inevitably have to disclose confidences. In effect, you’ve signed a noncompete and didn’t even know it. I like to insert some language into these provisions saying they aren’t intended to be a noncompete agreement.

4. Release: If you’re giving up all the potential claims you have against your employer, you should make sure you understand what you’re really giving up. The reader who asked this question mentioned some comments made that indicate he might have an age discrimination claim. If you take your agreement to an employment lawyer, you should discuss any potential claims you have to see if they might give you leverage to negotiate a better agreement.

If you were treated differently than others of a different race, age, religion, etc., you might have a discrimination claim. If you were fired right after objecting to an illegal practice, taking Family and Medical Leave or making a worker’s compensation claim, you might have a retaliation claim against your employer. These are just some examples of claims you’ll be giving up if you sign without understanding your rights.

5. Mutuality: If you’re releasing your employer from potential claims, can they turn around and sue you for something? If you’re agreeing not to say negative things about them, are they still able to slam you in references? If the agreement itself is confidential for you, can the employer tell coworkers and potential employers about it? These are some of the provisions I like to insist the employer make mutual. After all, if you have obligations to them after you leave, shouldn’t they have similar obligations to you?

My number one rule for signing any agreement is this: make sure you understand it before you sign. When in doubt, have an employment lawyer in your state review and explain it to you and discuss your options. Sure, it will cost some money, but isn’t it worth paying to be sure you aren’t making a huge mistake in signing?

That’s all for this edition of “Ask A Lawyer.” If you need legal advice, it’s best to talk to an employment lawyer in your state, but if you have general legal issues you want me to discuss here, whether about discrimination, employment contracts, medical leave, or other employment law issues, you can ask me at AOL Jobs.

Note to readers: I’ve edited this question to delete information that might identify the questioner, since the questions and my answers aren’t confidential, and for brevity. I’m giving a general answer under federal law, not specific legal advice. Your state may have laws with more stringent requirements for employers, so always check with an employment lawyer in your state about your specific situation.

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