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Legal Issues about Severance Agreements

Posted by on Aug 10, 2014 in Employment | 1 comment

All states in the U.S. except for Montana are at-will employment states. At-will employment means that the employer has the right to terminate the employment of a worker without being required to show just cause. Some states do recognize exemptions, specifically the public policy, implied contract, and covenant of good faith, so it would be in the best interests of employees to know if their termination falls under these exemptions.

At any rate, when a termination satisfies the state’s at-will employment policies, employers are under no obligation to provide severance pay unless it is specifically stated or implied in an employment contract, company rules, or employee’s handbook. For example, when a worker is laid off, he or she is entitled to receive compensation for work rendered as well as any paid leaves (with the exception of sick days) still remaining, but nothing else.

Severance pay is a certain amount that the employer may give an employee that has been terminated. In some companies, a severance agreement may be offered upon being let go which can be something like a week’s pay for every year of service, and most employees would be happy to sign. However, this can present problems for some employees that may not know what rights they are waiving by signing.

Some employers may offer severance pay with sincere intentions of helping the laid-off worker to some extent, but in most cases employers ask terminated employees to sign a severance agreement to avoid litigation. Most severance agreements include conditions which can severely limit the legal options of an employee to redress grievances, such as the right to sue the employer for any reason.

Furthermore, in some states such as New York there may be laws that bar employees from receiving unemployment benefits if they are receiving severance pay in excess of a certain amount. If you are a New Yorker, consult with a New York City employment lawyer to look over your severance agreement as well as advise you about the pros and cons of signing.

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  1. Pohl & Berk

    I shared this with my friends.

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