What Do I Need to Look For in my Severance Package?

It is not uncommon for high-level employees to be offered severance packages when they are laid off. This is for a few reasons. One is because employers are legally required to continue paying departed employees’ health benefits for 18 months under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Another is to keep employees from filing lawsuits against the employer later. Often, an employee waives his or her right to file a claim against his or her former employer when he or she signs a severance agreement.

Before you sign a proposed severance agreement, bring it to an experienced employment lawyer for a severance review to determine whether its terms are in your best interest. Below are a few specific clauses you should look for and consider carefully in your severance package:

An Appropriate Non-Compete Period Length

Your severance agreement may stipulate that you avoid working for competitors for a specific period of time. Typically, it defines the geographical region and specific industries and positions that count as competition. A fair non-compete agreement protects your employer’s investment in your career without creating an undue burden on you.

How Any Disputes will be Resolved

Another important clause in your severance agreement is the dispute resolution clause. Often, severance agreements require that disputes surrounding them be resolved through arbitration. If yours does not include this requirement, try to negotiate it so it does – litigation is a time-consuming, expensive, stressful process. It is in your best interest to avoid potentially having to go to court with a former employer.

Your Right to Review the Agreement and Revoke It After Signing It

Your severance agreement should also state how long you have to revoke the agreement, especially if you are 40 years old or older. Under federal law, employees over 40 must have 21 days to consider a severance agreement and seven days after signing it to revoke it. If you are under 40, you should still have a reasonable amount of time to review and possibly revoke it.

The Terms of your Severance Pay

When you review your severance package, be sure not to overlook one of its most obvious components: your severance pay. Take a look at how long you will receive payment and benefits, whether they will be paid in installments or in a lump sum, and at the crucial details governing their payment, like whether you will continue to receive payment if you start a new job.

Do not accept less than you think you deserve, and do not allow your desire to preserve your relationship with your employer drive you to accept a shorter severance period or more restrictive terms than you feel are fair. Your employment lawyer can help you determine whether your employer’s proposed severance package is appropriate and if not, he or she can negotiate a stronger package from your employer.

Work with a Skilled New Jersey Severance Review Lawyer

Your employment lawyer is your advocate. Do not sign a severance agreement until you have had an experienced employment lawyer review it. To set up your severance review, first schedule your legal consultation with a member of Sattiraju & Tharney, LLP