Two Things To Watch Out For In Your Severance Package Agreement

Posted on: 21 September 2020

In these turbulent times, many people are losing their jobs. Instead of just sending you off with a final paycheck, your company may offer you a severance package. Before accept it, have an employment attorney look over the severance contract for these two clauses to ensure they are fair to you.

Non-Compete Clauses

Depending on the industry you're in, your employer may include a non-compete clause that prohibits you from doing something that causes you to be in direct competition with the company. If you worked for a hair salon, the clause may state you can't work for a competing salon for three months after you leave, for example.

It's understandable the company wants to protect its own interests and prevent ex-employees from stealing customers away or using its own trade secrets against it. However, some companies get overzealous and write clauses that put an undue burden on employees, making it impossible for them to find replacement work.

For example, a real estate recruiter is suing her employer because the non-compete clause in her contract restricts her from working within the three surrounding counties or selling to customers of her former job for two years. Additionally, her employer refuses to release her from the agreement upon request, resulting in her losing job offers.

It's critical to have an attorney evaluate the non-compete clause to ensure it's equitable; otherwise, you may have difficulty getting a new job during a time when good employment opportunities grow increasingly rare.

Severance Modification Clauses

Another area that could become a problem later on is the severance modification clause. This provision gives the company the power to change the agreement and even terminate it at any time. Some also state the agreement will automatically be cancelled if the business is sold or merged to/acquired by another company.

On the surface, it sounds reasonable. However, this clause can provide a way for a shady company to get out of fully paying your severance. A prime example of this is when a business lays off employees and then is sold to another company a month later. If your severance package included long-term payments of some kind, you would be out that money because the sale of the company would end the severance contract.

An employment lawyer can review the terms of your severance contract and renegotiate them to ensure you're minimally impacted by modification clauses (e.g. get a lump sum rather than payments over time).

For advice on your severance package or other issues with your employer, contact an employment attorney.