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Severance Agreements: Tips for Employers


When drafting a severance agreement, it is important that employers do so thoughtfully. Mistakes in severance agreements can leave employers vulnerable to a lawsuit and may attract the attention of the Equal Employment Opportunity Commission (EEOC). Learn what you need to know when drafting a severance agreement to keep your company safe from legal actions.

Take an Individualized Approach

One size does not fit all when it comes to severance agreements. For each agreement that you are drafting, take the individual employee into consideration. Each employee will have different needs, and it is likely that there may also be legal obligations that the severance agreement needs to meet. There is often certain information that needs to be included in these agreements.

If the worker is older than 40, the Older Workers Benefits Protection Act (OWBPA) requires that their severance agreement includes specific language that advises the employee of their rights. These rights include the right to speak to a lawyer and the right to rescind the agreement. To protect these rights, the severance agreement should include a waiting period before the agreement goes into effect and the severance is paid.

Preventing Negative Reviews Isn’t Always Positive

It may be tempting to include language in your severance agreement that prevents employees from speaking negatively about your business, but you should consider the consequences. These clauses may be interpreted as preventing the employee from filing charges with the EEOC or from participating in governmental investigations and proceedings. If you do include such a clause, be sure to specify that these actions are not prevented by the agreement, and will not be in the future.

Increase the Value

If you want to have a valid and enforceable severance agreement, you will need to offer adequate consideration to your employee. There must be a benefit to the employee for agreeing to the severance. It must include something of value that the employee is not otherwise entitled to. Wages or earned benefits are not eligible for a severance package, as the employee is already entitled to them. They will not satisfy the requirement for adequate consideration. The value of the severance package should be more than what the employee would typically earn.

Carefully Consider Rehiring Restrictions

Some employers may consider a no-rehire provision for the severance agreement. This provision will prevent the employee from being eligible for rehire by the company, but the EEOC does not look kindly on these provisions. If you are considering including a no-rehire provision in a severance agreement, you should consult your employment law attorney.

Seek Legal Counsel

Drafting a severance agreement is a complex process, and mistakes can be costly for the employer. Details can be incredibly important for a severance agreement, but they are often overlooked. State and federal laws can change rapidly, so old agreements and form agreements can be outdated and not legally binding. Specific wording can also be used to prevent undesired litigation, so it is highly important to ensure that every word of the agreement is correct and serves its intended purpose. An experienced employment lawyer. They can look over your agreement for mistakes that may cost the company or change the terms of the agreement. You can also request that your attorney drafts a severance agreement that is both legally binding and fits your particular needs. A skilled employment attorney can protect your company and help you create severance agreements that stand up in the court of law.

Houston Employment Lawyers on Your Side

If you are looking for legal counsel for your severance agreement needs, look no further. At Shellist Lazarz Slobin, our team has been helping employers and employees alike since 1994. We are highly-rated by multiple professional organizations, and our Houston employment attorneys have a proven record of success. We believe that avoiding litigation is important, which is why we emphasize the importance of quick, effective legal solutions. Our team can help you protect your company with carefully and knowledgeably drafted contracts and agreements.

Schedule a consultation today. Contact Shellist Lazarz Slobin at (713) 352-3433.

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