Severance Agreements

From time to time, employers are faced with the task of terminating the employment of one or more employees.  In doing so, employers often seek to reward the employee’s years of service by offering the terminated employee a severance agreement that provides for a severance payment or package to be paid by the employer.  Such severance may (but is not required to) include the payment of a severance amount, continued health insurance premium payments, and other forms of consideration.  In order to be enforceable, however, the severance amount must represent consideration that is in addition to any monies or other benefits to which the terminated employee is already entitled, such as earned wages or accrued but unused paid time off.

In return for the severance payment or package, employers often desire to obtain a general release from the terminated employee, whereby the employee waives all claims up to the date of the severance agreement that the employee had or may currently have against the employer, including most claims for violations of federal, state, and local workplace laws.

Employers should note that the Older Workers Benefit Protection Act requires special provisions to be included in a Severance Agreement that is intended to act as a waiver of any claim for age discrimination under the ADEA.