Articles Posted in Severance Agreements

Employees Silenced by Non-Disparagement AgreementsIt has become extremely common, if not standard practice, for employers to include non-disparagement clauses in settlement agreements and severance packages they offer to their former employees.  These provisions prohibit employees from saying anything negative about their former employers.  They are extremely broad, since they prohibit true but negative statements and opinions.  In addition, they typically prohibit employees from saying anything negative not just about the company itself, but also about its current and previous owners, directors, officers, employees, subsidiaries and parent companies.

The unfortunate reality is that many employees who sign severance agreements either have not read the entire agreement or do not understand or appreciate many of its provisions.  Even individuals who realize they are being asked not to say anything negative about their former employers generally have no choice but to agree if they want the severance pay and other benefits that have been offered to them.  Of course, for someone who has recently lost his or her job it can be difficult to reject a severance offer over something like a non-disparagement clause.  As a result, employees regularly agree not to disparage their former employers.

A recent article in the New York Time, Laid-Off Americans, Required to Zip Lips on Way Out, Grow Bolder, indicates that there is a growing backlash against non-disparagement clauses.  For example, it indicates that several prominent Democrat and Republican members of Congress have questioned the widespread use and misuse of non-disparagement agreements.

A recent employment law case recognizes that in certain circumstances, an employer does not violate federal law if it requires former employees to sign away their legal claims against it as a condition to rehiring them as independent contractors.

In 1999, Allstate Insurance Company decided to treat all of its sales agents as independent contractors. Accordingly, that November Allstate fired 6,200 sales agents and gave them four options: (1) return to work as an independent contractor and receive a $5,000 bonus and other benefits; (2) receive $5,000 and the right to sell the employee’s Allstate account in September 2000; (3) receive 12 months of “enhance severance” pay; or (4) receive 13 weeks of ordinary severance pay.

To accept any of the first 3 options, a sales agent was required to sign a release waiving any existing legal claims he or she had against Allstate. Most of the employees accepted one of those three options. The employees who refused to sign releases received only 13 weeks of severance pay.

Some of the most common questions employees ask employment lawyers relate to severance pay. Below, we have answered a few of the most frequently asked questions about severance agreements under New York and New Jersey law.

Q: I have been laid off or fired by my company. Am I entitled to severance?

A: In New York and New Jersey there is generally no legal requirement for a company to pay severance to its employees. However, if your company has a severance policy or plan, then it has to pay you severance if you meet the relevant eligibility requirements. Likewise, if you have an individual employment contract, then your employer is required to pay you any severance you are entitled to under your contract.

Often, companies offer money or other benefits to employees who they have laid off or fired, as part of a severance agreement or separation package. Most severance agreements require you to waive your employment law rights before you can receive those benefits. In a recent case, Gregory v. Derry Township School District, the Court of Appeals for the Third Circuit ruled that an employee waived her right to bring a discrimination claim against her employer because she signed a Separation Agreement and General Release, even though she only had 15 minutes to review it before she signed it.

The Third Circuit is the federal appellate court that handles appeals from the District of New Jersey. It ruled that when deciding whether an employee had waived his legal rights, a Court should look at the totality of the circumstances including:

  1. How clear and specific the language of the release is;

  2. The employee’s education and business experience;

Many companies offer severance pay to certain employees who they have laid off, downsized, or fired. For example, some companies pay severance to employees who lose their jobs as part of a mass layoff or other reductions in force. Severance is often based on one or two weeks of pay for each year you worked for the company, but the way severance pay is calculated can vary greatly from one job to the next.

Severance pay can help soften the blow of losing your job. However, most severance agreements require you to sign away important legal rights. As a result, it is very important to make sure you understand all of the terms of your severance offer before you agree to it.

In New York and New Jersey, there is no legal obligation for companies to pay any severance to employees. However, if a company has a severance policy, it must follow it. Similarly, if you have entered into an employment contract which entitles you to severance, then your employer must comply with your contract.

On July 15, 2009, the United States Equal Employment Opportunity Commission (EEOC) issued guidance to employees who are offered severance agreements that include releases of employment law claims after they have been laid off or otherwise fired. More specifically, the EEOC’s guidance answers questions employees might have regarding severance agreements that require them to waive their rights under employment laws such as Title VII of the Civil Rights Act (Title VII), which prohibits gender discrimination, race discrimination, national origin discrimination, and religious discrimination; the Americans with Disabilities Act (ADA), which prohibits disability discrimination; and the Age Discrimination in Employment Act (ADEA),which prohibits age discrimination. While it is focused on federal claims, the guidance is also relevant to claims under state laws, such as the New Jersey Law Against Discrimination (LAD), the New Jersey Conscientious Employee Protection Act (CEPA), the New Jersey Civil Rights Act (NJCRA), and the New York Human Rights Law (NYHRL).

A significant portion of the EEOC’s guidance discusses what is required for a waiver in a severance agreement to be valid. Specifically, waivers (1) must be knowing and voluntary, (2) must offer the employee some consideration, meaning a benefit the employee would not otherwise receive, and (3) must comply with applicable state and federal laws.

The EEOC notes that, to determine whether an employee knowingly and voluntarily waived the right to sue for employment law claims like discrimination, retaliation, or harassment, courts generally consider factors such as:

If you have experienced workplace discrimination, harassment, or retaliation, a breach of your contract, or another violation of your employment law rights, you might want to meet with an experienced employment lawyer to discuss your employment law rights. But what should you bring to your initial consultation with an employment lawyer? The answer varies depending on the type of case you have. For example, someone with a case would probably want to bring different documents to the meeting than someone who is looking to enhance a severance offer. The following are some of the most important documents a client might want to bring to the first meeting with an employment lawyer.

Chronology or Timeline

In most cases, it is helpful to prepare a chronology or timeline of the relevant events for your employment lawyer. Generally, the chronology should be brief — in most instances between 1 and 3 pages. It should list the most important events relating to your employment issue, and identify the names and job titles of the people involved in those events. When possible, the chronology should provide the dates of the key events, and ideally should be in chronological order.

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