In the immediate aftermath of losing your job, a human resources professional at your company may present you with the option of signing a severance agreement. Reeling with the news of becoming unemployed, you may be unsure whether the severance agreement protects your best interests.
A severance agreement should ultimately benefit both parties: the employee and the employer. The employee gains severance pay in an otherwise uncertain time while the employer gains the promise of the employee not filing a lawsuit against the company and more. However, severance agreements often fail to perfectly balance the needs of both parties, instead favoring the employer.
Key considerations when reviewing terms of a severance agreement
The thought of losing your pay and benefits may cause you to appreciate the opportunity to sign a severance agreement. California companies may offer many senior-level employees severance packages that accommodate for lost pay, benefits and even potentially resources to assist in finding a new job, according to Fast Company.
However, a severance agreement can also contain terms that could be detrimental to you. Before you sign the agreement, consider the following questions:
- Does the agreement last for a reasonable period of time? The length of severance packages often reflects your time at the company, often in terms of a week of pay for every year spent at the company.
- Does the agreement limit your future employment options? Many agreements contain provisions prohibiting you from discussing your work or working for a competitor for a period of time.
- Do you understand what you are giving up? By signing the agreement, you could be forfeiting your rights to bonuses, commissions or other forms of pay, as well as your right to sue for wrongful termination.
- Have you read the terms and conditions? Severance agreements are filled with various terms. Carefully read these terms as they can uncover critical information, including your eligibility to collect unemployment benefits.
Lastly, when you find something unfavorable with the agreement, do not assume that you cannot negotiate with your employer. While in some situations attempting to negotiate may lead to your employer revoking the agreement altogether, at least inquiring about the potential for negotiation can lead to a stronger agreement that protects your interests in a turbulent time. Discuss your situation with a lawyer to determine an appropriate course of action to pursue what you deserve.