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What is the legal importance of a severance package?

On Behalf of | Apr 3, 2020 | Employment Law for Employers |

Determining if an employee should get a severance package can be a delicate situation. 

In order to comply with certain regulations, you should be fully aware of the reasons why severance is important to offer. 

What it consists of 

After a layoff, an employee will typically either receive a severance agreement or choose to leave without one. The reason why you would try to agree on a severance package is to prevent any future lawsuits from a disgruntled worker. 

In exchange for a package, the employee promises to not sue your company. If he or she does not get any severance, you still may be in legal trouble if he or she decides to sue. 

Terms and agreement 

The composition of a severance package is usually varied. It is not a federal requirement to offer one for every employee, but some jobs do. One of the biggest reasons for giving severance is to prevent any discrimination lawsuits in particular, because of potential issues regarding the age or gender of a prior employee. 

In signing for a package, the employee ends any possibility for legal recourse. One other instance that usually occurs is a release of rights from the job, which means the employee can not get sued for past wrongful behavior issues. These two agreements working in tandem can help the agreement to go smoothly. 


Once you agree on a deal, the employee will receive many benefits. There are some facets that influence how big the amount will be. Elements taken into consideration such as the amount of time employed at the company, how well-off the employee is, and the reason why he or she left can all influence severance benefits.