Some people negotiate severance agreements when they first start with a company. This can help them continue to receive payment and access to specific benefits for a certain amount of time after their termination. For others, the negotiation of a severance agreement occurs upon notice of their termination. In that scenario, the person on the cusp of losing their job generally needs to review the proposed severance agreement with an employment attorney experienced in Rhode Island contract law.
An attorney can help identify problematic clauses that could affect the worker’s future career options and may even be able to spot red flags indicating that the severance package is an attempt to hide a wrongful termination.
What clauses could cause future issues?
Employers frequently bury restrictive covenants in severance agreements. Workers may find themselves subject to a non-compete agreement or a non-solicitation agreement.
A non-compete agreement could effectively prevent a worker from starting their own company or taking a job with a direct competitor in a specific geographic area for a set amount of time after their termination. They may either have to relocate or move into a different industry to avoid violating the agreement.
A non-solicitation agreement may effectively prevent them from offering employment opportunities to their former co-workers after they start their own business or seeking to do business with their former employer’s clients, customers or vendors. Restrictive covenants can impact a person’s career for years.
Liability waivers are another common inclusion in a severance agreement. Employees effectively absolve the employer of any liability by accepting the severance package. They may not be able to file a lawsuit for wrongful termination, discrimination or prior wage violations if they sign a severance agreement with a liability waiver.
Was the termination wrongful?
Businesses sometimes provide excuses as a pretext for what is truly a wrongful termination. Employers may claim that they have eliminated a position, that there were issues with the employee’s performance or that a workplace cultural mismatch warranted the termination. In reality, the decision might have a basis in the person’s protected characteristics, making it discriminatory. It could also be the result of an employee asserting their legal rights, which might make it a retaliatory firing.
Having the right legal guidance while evaluating the severance agreement could help employees identify signs of wrongful termination and avoid waiving their right to take legal action to hold their employer accountable. Recognizing the potential consequences of signing a severance agreement without review can help them assert themselves despite the fear and stress they may experience upon learning of their termination.