Severance Agreements: What to Know Before You Sign One in Maryland

Employers commonly use severance agreements to protect themselves against potential liability, preserve their public reputation, and prevent the disclosure of confidential information. In some cases, they also use severance agreements to impose competitive restraints and other restrictions on their soon-to-be-former employees. With this in mind, when faced with the prospect of signing a severance agreement, employees need to be careful to protect themselves as well, and this means consulting with an experienced Maryland employment lawyer who can help them make informed decisions with their long-term best interests in mind.

If you’ve been offered a severance agreement, what do you need to know before you sign? Here are some key insights from Maryland employment lawyer Jay Stafford.

Compensation and Benefits

Understandably, many employees are most concerned with the financial aspects of their severance agreements. If you are losing your job, you will want to make sure you have as much financial stability as possible.

A key consideration to keep in mind is that employers will typically offer their employees the minimum amount that they think is necessary to get them to sign without negotiating (or taking legal action). This means that more money will often (though not always) be on the table. If you are dissatisfied with your severance package—or if you aren’t sure whether you should be satisfied with your severance package—this is absolutely something that you should discuss with a lawyer before you sign.

Some additional considerations related to compensation and benefits in severance agreements include:

• Under the federal Worker Adjustment and Retraining Notification Act (WARN Act), covered employers are required to provide 60 days’ advance notice of large-scale layoffs. If you have been placed on leave prior to termination because your layoff falls under the WARN Act, you are legally entitled to your normal compensation and benefits for the entire 60-day notice period. This is not part of your severance package.
• It is generally in employees’ best interests to obtain their severance payments as a lump sum. This avoids any issues with payment in the future, and it provides immediate access to the full amount of your severance.
• Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), covered employees who lose their jobs are entitled to stay on their employer’s health care plan for a specified period of time (typically up to 18 months). While this can help you avoid losing coverage, you will be required to pay the full premium for your coverage, including your employer’s share.

All of these are factors you will want to consider when deciding whether to accept your employer’s proposed severance agreement in its original form. If you are interested in seeking additional compensation or if your severance agreement does not provide for a lump-sum payment, an experienced Maryland employment lawyer can help you understand the options you have available.

Reason for Termination

If you are being laid off for reasons unrelated to your performance, capabilities or conduct, this should be made clear in your severance agreement. The agreement should state that your layoff is due to a reduction in force (RIF), and not due to anything you have done (or haven’t done) as an employee.

This is important for a couple of reasons. First, for-cause terminations can impact former employees’ eligibility for unemployment benefits. Second, if your severance agreement states that you were terminated for cause, this can impair your future employment prospects. As a result, it is critical that your severance agreement is accurate in this regard—and, if it isn’t (or if you aren’t sure), this is something you will want to discuss with a Maryland employment lawyer as well.

Confidentiality and Other Restrictions

Employers routinely include confidentiality provisions in their severance agreements. While some of these provisions are tailored specifically to protecting confidential and proprietary information, others are extremely broad—and effectively prevent former employees from saying anything about their time with the company.

Before you sign your severance agreement, you will want to make sure you have a clear understanding of what you will (and won’t) be allowed to say post-termination. You will want to consider whether you may want to seek any confidentiality protections as well. If your employer’s disclosure of the terms of your severance agreement could negatively impact any future employment opportunities, then a mutual confidentiality clause may be warranted.

Along with confidentiality provisions, severance agreements may also include a variety of other restrictions. Non-competition covenants and non-solicitation covenants are two of the most common examples. If your severance agreement includes a non-competition covenant or non-solicitation covenant (or both), we strongly recommend consulting with a Maryland employment lawyer about what you might be able to do to have these covenants modified or removed.

Do You Have Grounds to Take Legal Action?

As an employee, you are not required to sign a severance agreement. As discussed above, employers use severance agreements as tools to protect themselves. If you have grounds to take legal action against your employer, then taking legal action may be your best option—and you will not want to sign a severance agreement that includes a waiver of your legal rights.

Discrimination, harassment, equal pay violations, overtime pay violations, WARN Act violations, and other violations can all entitle employees to financial compensation. If you have a claim against your employer, you could be entitled to far more than your severance agreement provides. But if you sign, you could lose your ability to hold your employer accountable—and this could prove to be a very costly mistake.

Schedule a Confidential Consultation with a Maryland Employment Lawyer Today

Have you received a severance agreement from your employer? If so, we strongly encourage you to contact us so that we can help you make informed decisions about your next steps. We have extensive experience representing employees in severance agreement negotiations and related legal matters.  To schedule a confidential consultation with a Maryland employment lawyer at The Law Firm of J.W. Stafford, please call 410-514-6099 or tell us how we can reach you online today.