It’s not easy when you find out you’re losing your job. Whether you’re laid off or terminated for some other reason, you’ll likely be confused, frustrated and anxious about your future. Your employer may offer you severance pay – if they do, it can seem like an easy decision to accept it. But is it really in your best interest?
What is a severance agreement?
Broadly speaking, there are two types of severance agreements. One is pre-employment, where the employer and employee negotiate an amount of money that must be paid to the employee, should the employer terminate them. The second is a post-employment severance agreement. This is the type an employer can offer you once they’ve already decided to let you go.
There are certain things an employer must pay when they terminate you, such as wages that are still due and vacation or sick pay. Severance pay is completely different. It is money the employer offers you in addition to required pay – it does not have to offer severance pay at all.
Why could severance pay be a bad thing?
Since the employer is offering to give you something it doesn’t have to, it can appear to be a gift accepted immediately. And often, accepting the agreement is the right decision for you to make. But in exchange for the money your employer offers, you will be required to make promises about what you’ll do in the future. A severance agreement is a contract.
In that contract, the employer will likely require you to give up all rights you have to sue them. If you experienced discrimination or harassment in your job, or had issues when your employer failed to pay you properly, signing the agreement will prevent you from litigating those issues. The agreement may also limit where you can work and prevent you from speaking negatively about your former employer.
Every severance agreement is unique. What you must agree to will vary from one employer to the next. If you’ve been offered severance pay, speak to a professional who is experienced in employment law. They can help you go through the details of the agreement and make a good decision about whether to accept it.