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What is a severance agreement?


With today's economy forever evolving and still trying to pick itself up from the recent recession, many employees still find themselves losing their jobs. The reasons to lay off an employee are varied. It may be budgetary cuts, the merging of two companies, downsizing, outsourcing or just the purging of veteran employees with high salaries in favor of a newer crowd. With the exception of discrimination on the grounds of national origin, race, religion, sex, age or disability, an employee may be fired for any number of reasons.

Many employees found their jobs at the time of a booming economy, and may have been offered a severance agreement at the time job employment. What is a severance agreement? A severance agreement is an agreement between the employer and employee, which gives specific terms in the event of a termination.

A severance package often gives the recently fired employee additional payments based on salary that may be distributed as a lump payment or broken down over time. The distribution will be based on the agreed upon in the terms. It is important to note that severance agreement benefits are in addition to benefits already entitled to the employee, such as remaining sick or vacation days.

Many employers offer severance agreements in an effort to protect themselves from liabilities by having the employee sign a waiver at the time of the settlement agreement. This neither removes all employee's rights nor does it exempt the employer from liabilities in the event of employee discrimination.

Understanding the details and benefits of a severance agreement is important. Employees should be aware of his or her rights, ensuring they have been upheld in the execution of such a document. Those unsure of the situation, should take steps to protect his or her rights and interests.


Source: Eeoc.gov, "Understanding Waivers of Discrimination Claims in Employee Severance Agreements," Accessed July 20, 2015.

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