A separation agreement may be presented to employees when their employment ends, outlining the terms of their departure, including severance pay, benefits and other conditions. While these severance agreements may appear straightforward, some contain unfair terms that can potentially impact an employee’s future in significant ways.
In certain cases, the terms of such agreements may be so one-sided that they become actionably unfair, meaning they could be legally challenged or negotiated for better terms.
Lack of adequate compensation
One of the most common signs of an unfair separation agreement is inadequate compensation. Many agreements offer severance pay in exchange for the employee waiving certain rights, such as the ability to sue for wrongful termination or discrimination. If a severance package does not fairly compensate the employee for lost wages, benefits or the time it may take to find new employment, it could be considered unreasonable.
Overly broad clauses
Many separation agreements include non-compete or non-solicitation clauses that restrict an employee’s ability to work for competitors or contact former clients. If these restrictions are overly broad in scope, duration or geographic area, they may be unenforceable. In states with strict limitations on non-compete agreements, these provisions may not hold up in court. Employees should carefully review these clauses and consider seeking legal guidance before signing, as they could limit future career opportunities.
Waivers without proper consideration
Separation agreements often require employees to waive their right to file legal claims against their former employer. While this is common, it becomes unfair if the employee is not given proper time to review the agreement or is pressured into signing without understanding the implications. Under federal law, employees over the age of 40 must be given at least 21 days to consider a severance agreement that includes a waiver of age discrimination claims. If an employee is not given sufficient time or an agreement attempts to waive claims that cannot legally be waived, it may be actionably unfair.
These are just a few of the ways in which separation agreements may prove to be legally actionable. It isn’t hard to see why it’s generally wise to have an attorney review the terms of such agreements before signing them accordingly.