For most South Carolina employees, being presented with a severance agreement at the time of termination–especially when the termination comes unexpectedly–can cause a great deal of anxiety. Severance agreements are legal contracts, and they can run ten or fifteen pages long with many complex provisions and uncommon language, not to mention these sneaky provisions in severance agreements that can create trouble for the employee later on. Trying to understand what everything means, on top of the emotion of a recent termination as well as the additional factor of a ticking clock on how long you have to sign the agreement, only makes a fraught situation that much more difficult. Now add in the prospect of a company slipping in a sneaky provision that has ramifications that the employee is unlikely to understand without legal advice from a South Carolina severance review lawyer, something some employers count on. I’ve already discussed liquidated damages in a prior post, but here are some other provisions to keep an eye out for. [Read More: Liquidated Damages Provisions in Severance Agreements]
What Are Some Sneaky Provisions that Employers Slip into Severance Agreements?
I’ve written previously about the general contents of severance agreements in South Carolina, including the primary provisions to look out for, such those on attorney’s fees, where the lawsuit can be brought, and one-way non-disparagement provisions. [Read more: The Contents of Severance Agreements for South Carolina Employees] Given the often short time frame that companies provide to their employees to sign the agreements, it can be difficult to schedule a severance offer consult before time runs out. [Read More: How Long Do SC Employees Have to Sign Severance Agreements?] Here are the ones I see most often.
Post Employment Restrictive Covenants
The sneakiest culprit that companies slide into long severance agreements are what we call “post employment restrictive covenants.” That means an agreement about what the employee can do or not do after employment ends. Often times, South Carolina employees are required to sign non-competes, non-solicits, or non-disclosures at the beginning of employment. However, when companies forget to do that, they will try to slip those same onerous terms into a severance agreement. In exchange for perhaps a few weeks of pay, the employee would be agreeing to a restriction on employment for one or even two years. It could be anything from an agreement not to solicit employees of the company to come work for your new employer (fairly easy to abide by) to a non-solicitation of customers (more complex, especially if you are a salesperson or have regular contact with customers) up to a full-on non-compete provision that prevents you from working in your chosen career field in a large geographic area like the whole of the United States for multiple years (making it much more difficult to find a job).
If you’re presented with such an agreement before you start working, you still have a chance to negotiate the provisions, and at the very least, you are agreeing to certain restrictions in exchange for a whole lot more, such as a job with a salary and benefits. But in terms of severance, you’re likely only being offered a few weeks or months of pay in exchange for a provision that could last years. If the restriction wouldn’t impact your potential new employment, then fine, no big deal. But if it would, you need to consult with a South Carolina severance review lawyer before agreeing to the provisions.
Forum Selection Clauses
The other potentially problematic provision can seem almost like its thrown in as an afterthought: a forum selection clause. This type of provision means that an employee is agreeing that any disputes over the severance agreement must be filed in a certain state and county’s jurisdiction. Many companies that hire South Carolina employees in this state are still based in other locations throughout the U.S. It’s extremely common for a severance agreement include a provision where the employee agrees to sue or be sued in Delaware, for instance, or any other state that is far more convenient for the company. They most likely are headquartered there, and their primary lawyers are likely to be in that state as well.
What might seem like a minor provision can become much more difficult to face in real life. I’ve represented employees from all over the country that get sued here in our state, just because they agreed to such a provision in an agreement. You end up having to find a lawyer in a state where you likely have no connections, and if there’s a lawsuit that includes court appearances or depositions, then you may have to travel out of state on several occasions, which is expensive and time-consuming.
In conjunction with a forum selection clause, you may also see what we call a “choice of law provision.” This means that you have agreed that another state’s laws would apply to the situation, rather than South Carolina’s. Every state is a little bit different, and generally employers choose a state’s law that they view as being more favorable to them and less favorable to you.
Arbitration Provisions/Jury Trial Waiver
You may also be signing away your right to a jury trial altogether. This means that if the company breaches its obligations to you, such as for payment of money or for providing a neutral employment reference, then you don’t even get to present your claims to a jury of your peers. With a jury trial waiver, you’re agreeing that a judge only would be the factfinder, instead of a jury. And with arbitration, you’re giving away your right even to see the inside of a courtroom. In arbitration, the company and the employee hire a third party attorney or retired judge to serve as the sole authority in the case, with limited rights to appeal.
If you agree to these types of sneaky provisions in severance agreements–and in conjunction with the forum selection clause and choice of law provision mentioned above–then when the company breaches the agreement, you may have to bring a private arbitration proceeding in a distant state, applying a distant state’s laws, without a judge or a jury, and you’ll be footing part of the bill in arbitration costs just to hold the company to account for a breach.
How Can South Carolina Employees Fight Back Against Unfair Provisions in Severance Agreements?
You are not obligated to agree to any severance agreement. Severance is a matter of contract, and contracts can be negotiated. How much better you can negotiate your agreement–and whether you can negotiate away these types of sneaky provisions in severance agreements–depends a great deal on the strength of your legal claims against the company. Not every employee has legal claims. South Carolina is an at-will employment state, meaning that employers can terminate employees for good reason, bad reason, or no reason at all. [Read More: At-Will Employment vs. Right to Work for SC Employees] However, they cannot fire you for ILLEGAL reasons. If you have been fired in retaliation for making a protected complaint about discrimination or harassment based on age, race, sex, national origin, religion, or disability, then you may have a legal claim against the company that needs to be filed with the EEOC or in federal court. Or if you’ve requested medical leave under the Family and Medical Leave Act and been terminated or denied leave, then you may have a legal claim against the company. Or perhaps the company owes you money in terms of unpaid commissions or unpaid overtime pay, then you may have a legal claim against the company.
Every case is fact specific, and not everyone will have a basis for claims against their employer. But I recommend that you always have any contract reviewed by an attorney before you sign it, and severance agreements are no exception. Otherwise, you risk agreeing to these types of unfair and sneaking severance terms that can have lasting repercussions on your future employment. Even if you can’t get more money from the company, sometimes you can still negotiate these types of non-monetary terms in a way that are more equal and fair.
If you have any questions about sneaking provisions in severance agreements or need a severance agreement reviewed, please reach out to our office to schedule a severance review consultation at (864) 233-4351 or via our Contact Us page.
