Attorney
When employment relationships come to an end, the potential for legal problems becomes much higher. The employer faces the possibility of litigation over how the employment terminated, which in turn raises the chances of devastating damages and loss of reputation. Severance agreements exist to address these and related matters.
These critical contracts outline the terms and conditions that will apply at the end of the professional relationship between the employer and the employee. If you are a New York or Connecticut employer, you cannot afford to do business without using severance agreements. Let the dedicated employment lawyers of Mitchell & Sheahan, P.C. guide you and your organization.
Why Should My Business Use Severance Agreements?
You may terminate an employee, or have one voluntarily resign, and believe your business can move on in peace. However, many employers come to be embroiled in legal disputes regarding the end of the working relationship. Accusations of discrimination, withheld pay, unfulfilled promises, and more abound.
A severance agreement specifically exists to mitigate the risks that apply when the employer-employee relationship terminates. It can do in several ways:
- Clarifying the terms and conditions that attach to the end of the professional relationship
- Waiving any claims the departing employee may have had against the employer
- Providing certain benefits such as extended pay to compensate the worker and lessen the chances of a future dispute
A seasoned New York or Connecticut employment lawyer can assist by negotiating, drafting, and executing severance contracts that protect your business.
Essential Terms to Include in Your Severance Agreement
As an employer, your primary objectives are to limit liability, avoid government investigations, reduce the chances of an adverse court judgment, and protect your reputation. Using a severance agreement to govern the end of your workers’ employment can accomplish these goals. It should include:
- Pay: How much will you pay the departing employee, in what manner (e.g. lump sum versus installment payments), and what conditions will apply?
- Other compensation: Included here are such items as pay for unused vacation time, deferred compensation, and more.
- Retirement and financial benefits: The departing employee must understand how they may use their retirement and other benefits (e.g. stock options) and how they vest.
- Termination date and reason: The date of the employment termination should be clear. It’s a good idea to include the reason as well, but let an attorney carefully draft this.
- References: If your business intends to make references available, you should specify what form they will take.
- Return of property: Any company property in the employee’s possession must be promptly returned, especially if it consists of proprietary assets or confidential information.
- Restrictive covenants: Non-compete and non-solicitation clauses are covered here, and careful drafting of these terms is critical. You also need a confidentiality clause, especially if you wish to keep private the reason for the job termination.
- Release of claims: You will want the departing employee to waive any legal claims they have or might have against your business. Again, careful drafting of this section is especially important.
Considerations for Protecting Your New York or Connecticut Business
As you decide how to draft your severance agreement, keep these considerations in mind:
- Your industry: Different litigation risks are inherent in different industries. The severance agreement terms for a software company will be different from those of a securities firm.
- Negotiations: You may need to negotiate varying terms with the departing employee, so your agreement should be flexible enough to accommodate modifications.
- Post-employment issues: If you are concerned about what the departing employee may do upon exiting your company (for instance, that they might disparage your business) you may need stricter terms.
- Employee legal representation: It might be a good idea to encourage the employee to consult their own attorney before signing the severance agreement. The language in the document can then reflect this fact, which will make it much harder to dispute the contract later.
- Addressing known legal problems: Although the severance agreement can include a waiver of actual or potential legal claims, you may want to have an employment lawyer investigate such matters further to discover if there is a pervasive problem in your company.
We Have Your Business Covered
New York and Connecticut employers know they can trust the seasoned counsel of Mitchell & Sheahan, P.C. From severance agreements to employment contracts and litigation, we’re ready to advise and advocate for your organization. Contact us today to get started.