Employment Severance Agreements

By Brian C. Dale

Often we are asked to prepare or negotiate employment severance agreements. When the employment relationship ends, you should consult your lawyer before entering into a severance agreement. The following list of topics is a starting point:

  • is the employer’s severance payment fair and reasonable for the rights and claims being released by the employee?
  • should payroll, paid leave, health or retirement benefits be extended or ended on the last day of work?
  • is the employer required to offer COBRA health insurance continuation to the employee?
  • does a union collective bargaining contract or employer policy govern the terms and conditions of severance?
  • how will severance compensation be taxed?
  • is there a non-competition, non-solicitation, or confidentiality agreement already in place, or should such agreements be reached now?
  • is the employee eligible to seek future re-employment; and if rehired does the employer cease paying severance compensation?
  • does the employee have a workers compensation, disability, administrative complaint, lawsuit or other employment claim pending?
  • will the employee be eligible for unemployment compensation and will the severance payment reduce unemployment benefits?
  • is the employee required to return company property such as computers, tools, equipment, etc.?
  • does the employer need the employee’s cooperation for information or assistance after termination?
  • will the employee be asked to release the employer from all liability for claims during employment, such as wage/hour compliance, harassment and discrimination, wrongful termination, etc.?
  • will the agreement be mutual so that the employer also releases the employee from potential claims?
  • will the employer give a letter of reference or other information to prospective new employers?
  • are the terms of the agreement to be confidential?
  • may the agreement be revoked?
  • should disputes concerning the agreement be arbitrated privately or taken to court, what are the remedies, and which state’s law should apply?

Washington law requires that a severance agreement be voluntary, fair and supported by sufficient compensation. Federal law imposes a waiting period and other requirements before an employee can be asked to waive claims. In addition to these legal requirements, an experienced lawyer will advise his or her client on the best terms for severance and how to handle post-employment disputes.