When an employment relationship ends between the employer and the employee, the employee will often times be presented with a Separation Agreement. This agreement specifies the terms of the employment termination and may include severance pay in some cases, but the real reason employers use Separation Agreements is to protect themselves from liability.
Separation Agreements often contain a General Release, which if the employee signs, releases the employer from any legal claims that the employee may have against the employer such as wrongful termination. This is particularly true if an employee has a potential claim for age discrimination under the ADEA. Although employers are entitled to ask you to sign the agreement even if they believe that you may have a claim against them for wrongful termination or discrimination, employers cannot coerce you into signing the agreement. Additionally, the employee must be given at least 21 days to review the agreement if signing the agreement waives your right to pursue a claim for age discrimination.
If an employer is asking an employee to resign, the separation agreement can be used as leverage to negotiate severance pay and uncontested unemployment benefits.Â If you are presented with a Separation Agreement, it’s a wise idea to consult with an attorney. You may discover that you may have a legitimate claim for wrongful conduct against the employer and you may be able to receive a significantly higher severance package.
A general rule of thumb for severance pay is that employees can receive one to two weeks of severance pay for every year that they have worked for the employer. For high-level executives, this can even increase to one month of pay for every year of employment.
A Separation Agreement may also limit an employee’s ability to seek alternate employment. This is known as a restrictive covenant. If an employer is worried that you possess information that could be used by a competitorÂ to seek a competitive advantage, the employer may ask you to sign a Separation Agreement containing a restrictive covenant. The restrictive covenant will limit the geographic area and duration where you cannot compete against the employer. Restrictive covenant laws vary by state, but the general rule is that they are valid if they are reasonable in scope and duration.
If you would like to receive an attorney review of a Separation Agreement, please contact Zachary Zawarski by calling (484) 362-9286. Zachary Zawarski is an employment law attorney located in Bethlehem, Pennsylvania.