As an employment lawyer, I meet with multiple people every month to review severance agreements. The best practice is to always have an experienced employment lawyer review all severance agreements with the employee, just so the employee knows exactly what he or she is agreeing to.
Severance agreements are a binding contract, and it will almost always include sections that bind the employee moving forward in some serious ways. In this blog post, I will review the key features contained in virtually every severance agreement. In a follow-up post, I will discuss options that employees have to negotiate for more severance.
Release of Legal Claims
Your employer is not giving you severance out of the goodness of its corporate heart. The employer wants something in exchange for the offer of severance: a release of all your legal claims against the company.
By the signing severance agreements and accepting payment of the severance money, you as the South Carolina employee are giving up your legal right to sue your employer for any illegal action the company may have taken against you. Some examples of legal claims are:
- Discrimination claims based on age, race, sex, national origin, disability, or religion
- Retaliation claims (being fired for complaining about discrimination)
- Unpaid wages (paychecks, bonuses, or accrued vacation time)
- Breach of an employment contract
- Unpaid overtime or minimum wage under the Fair Labor Standards Act
- Violations of the Family and Medical Leave Act
By signing the agreement, you will no longer be able to sue your employer for any of these legal claims. The severance amount is the only money you will ever get from your employer for any wrongful actions.
Confidentiality / Non-Disclosure
Severance agreements will also include a confidentiality provision, which prevents the employee from telling anyone about the amount of severance that the employee received.
Often, these confidentiality provisions will also include a prohibition on the employee disclosing or misusing confidential company information or trade secrets. If the employee breaches this provision, then the employee can be sued for breach of contract.
An employer may be worried that the employee will speak poorly of the company, especially if the employee was fired and is still angry about that decision. To address that concern, the company may include this provision in its severance agreements to prohibit the employee from saying negative things about the company or its management. Again, if the employee breaches this provision, he or she can be sued for breach.
Normally, if you sue someone in America, you have to pay for your own attorney, and you cannot make the person you are suing pay you back, unless there’s a contract that says otherwise. So companies will include an attorney’s fee provision (generally one sided) so that if the company sues the employee to enforce the agreement or for a breach of the agreement, then the employee has to pay back the company for any money it has paid its attorneys. Attorneys working for companies are not working cheaply, and this attorney’s fee bill, if enforced against an employee, could easily be in the tens of thousands of dollars.
Forum Selection Clause–Where Can I Be Sued?
Generally, a South Carolina resident and employee can only be sued in South Carolina. However, employers often insert a “forum selection clause” into the severance agreement that requires any lawsuit over the severance agreement to be filed in a certain state. If the company is headquartered in another state, even if it does business in South Carolina, then the company will want to be able to sue the employee in the company’s home state.
This provision can cause a great deal of trouble for a South Carolina employee later, if the employee winds up getting sued in California just because that’s where the former employer is located. The SC employee has to hire a lawyer across the country, even though he or she may never have left South Carolina while working.
Have an Employment Lawyer Review the Severance Agreement with You
You should always have an employment attorney review the agreement and explain the legal implications of each provision in . If you sign the agreement, then the law presumes that you read and understood every single word in the contract, so make sure that you do. If you have a severance agreement you need reviewed, contact our office today to arrange a consult.