A severance agreement outlines the terms and conditions of an employee’s separation from a company. Many employers use severance agreements to insulate themselves from potential liability that may arise from terminating an employee. In exchange for giving an employee a severance package (i.e., a sum of money or benefits), an employer may require the employee to sign an agreement that includes restrictive covenants (i.e., noncompetition, nonsolicitation or nondisclosure clauses) and/or releases the employer from liability for various legal claims that may be brought by the employee.
Two important elements apply to all releases, whether they are contained in employment agreements, severance agreements or elsewhere. First, any waiver of an employee’s legal rights must be knowing and voluntary. Second, any waiver must be written in a manner that is clear and understandable.
It is important to consult with an attorney before signing a proposed employment or severance agreement, particularly where the agreement includes restrictive covenants or asks you to waive your right to bring legal claims.
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