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Severance agreement: limiting employees’ ability to sue

As an employee, you may be offered a severance agreement if your company terminates your employment. The agreement states the date of termination, outlines offered payments or benefits and releases the company from claims you may wish to make against them.

A severance agreement is a contact between you and your employer. You agree to not sue the company in exchange for some sort of payment or benefit. In order for the severance agreement to be valid, the company must offer some sort of compensation that you would not be otherwise entitled to. Does this mean that signing the severance agreement removes all possibility of suing for discrimination?

Challenging severance agreements

In order for the severance agreement to be valid:

  • The employee must knowingly and voluntarily sign the agreement
  • The employee must have sufficient time to review the agreement
  • The employee cannot be coerced into signing
  • The employee must be able to consult an attorney
  • The employer must write the agreement in a way that is clear and easy to understand
  • The employer cannot keep the employee from negotiating the terms of the agreement
  • The employer must offer pay or benefits above what the employee is legally entitled to

If the agreement is valid, you can still legally file a claim with the Equal Employment Opportunity Commission (EEOC) if you believe that your employer has discriminated against you based on your age, race, sex or a disability. Your claims can pertain to actions taken against you during employment, or your employer’s choice to terminate your employment. No matter what is written in your severance agreement, your employer cannot prevent you from filing a claim with the EEOC or participating in an EEOC investigation or hearing.

Take time to evaluate your severance agreement

If you are asked to sign a severance agreement, take time to carefully read and review the information.

  • Ask your employer any questions that you may have on the offered pay and benefits, language within the document or the timetable for payment
  • If you are not satisfied with the offered agreement, consider negotiating a more favorable outcome
  • If you do not understand the terms of the agreement, you can ask to analyze the agreement with your lawyer
  • Make sure you understand what pay and benefits you are legally entitled to versus the extra benefits that your employer is offering

If you think that you may have legal claims against your employer, carefully consider your options before you sign a severance agreement. Contact an attorney who can evaluate your potential claim, and advise you on the best course of action. You may not want to sign a severance agreement if your potential claim could be more beneficial.

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