A severance agreement is normally part of an employment agreement. However, it can also be a stand-alone document an employer wants a departing employee to sign.
If certain elements are missing, the document will not stand up in court. The drafting of an enforceable severance agreement begins by using plain, understandable language.
The purpose of a severance agreement
A severance agreement outlines the compensation an employer offers an employee departing the company. The employer may not have to provide such an agreement but may feel it prudent to grant compensation in exchange for the departing employee agreeing to certain post-employment limitations.
Confidentiality and similar provisions
The severance agreement may contain confidentiality, non-compete or non-disparagement provisions, but the Equal Employment Opportunity Commission is very specific about the wording of these provisions. They cannot be “overly broad or misleading” or the court will find the agreement unenforceable. In exerting a measure of control over the conduct of the person receiving the severance agreement, the employer hopes to keep company secrets intact, maintain brand integrity or prevent the former employee from filing a charge of discrimination against the company or participating in an investigation. However, a severance agreement must be carefully drafted so as not to infringe upon the employee’s Title VII rights.
Special wording for older departing employees
The severance agreement for a departing employee aged 40 or older must adhere to rules set out under the Age Discrimination in Employment Act, or ADEA and the Older Workers Benefit Protection Plan, or OWBP. The employer must allow the federal minimum of 21 days for the former employee to review the agreement. In drafting the agreement, the writer must avoid complex sentences and legal jargon. The wording must be plain and the meaning clear so the reader will have no trouble understanding what he or she is preparing to sign.
Seeking a review
The severance agreement for departing employees age 40 and older must also advise that they obtain legal guidance and a review of the document before signing. This is good advice for anyone who receives a severance agreement and wants to ensure that, if necessary, it will be enforceable in court.