Severance Agreement Lawyer Auburn Hills, MI

Severance agreements can address various issues regarding the end of the employer-employee relationship and the parties’ respective rights and duties following the termination of a worker’s employment. Typical provisions of severance agreements include the following.

Severance pay

A severance agreement will describe what compensation the employee will receive in exchange for their severance. Employers may agree to continue an employee’s salary in whole or in part for a certain period after termination or make a lump sum payment as a form of “garden leave” to compensate an employee terminated as part of a downsizing or corporate restructuring, or as consideration for the release of specific legal claims against the employer.

Continuation of benefits

An agreement may extend employment benefits, such as health/dental/vision insurance, for a certain period after an employee’s termination, whether through COBRA benefits or benefits funded by the employer as part of the employee’s severance package. 

Return of company property 

Severance agreements may include deadlines for employees to return company property (such as laptops, cell phones, and physical documents) and may specifically identify which property the company expects returned. Alternatively, the agreement may contain a clause under which the employee certifies they have returned all company property.

Rehire eligibility

Depending on the circumstances of the employee’s termination, a severance agreement may expressly address the employee’s eligibility to apply for another position with the employer.

Pension and retirement benefits

Severance agreements can also address what happens to an employee’s vested pension and retirement benefits, which may include the employer’s agreement to cooperate with rolling over the employee’s retirement accounts to a new employer.

Deferred compensation

Unless addressed by the severance pay language, an agreement may also address the disposition of an employee’s deferred compensation (e.g., stock options, profit shares, etc.) by accelerating the vesting of such compensation or terminating the employee’s right to unvested compensation.

IP assignments

A severance agreement may include language under which a departing employee agrees to assign any intellectual property they developed during their employment.

Release of claims

Severance agreements may include mutual releases of claims, under which employers and employees settle any claims they have or might have against one another. However, some employment statutes prohibit employers from having employees release claims under such laws.

Non-disparagement clauses

Under a non-disparagement clause, employees and employees may agree not to speak or write negatively about one another. This means the employee may not comment negatively about the employer, and the employer agrees not to provide a negative reference for the employee.

Restrictive covenants

A severance agreement may include different restrictive covenants, such as confidentiality/non-disclosure agreements, non-solicitation agreements, or non-compete agreements. Confidentiality/NDA clauses may require the employee to keep the employer’s proprietary information confidential and to refrain from using that information for their or third parties’ benefit; alternatively, a confidentiality clause may constitute the parties’ agreement to keep the terms of the severance agreement confidential. Non-solicitation clauses bar the employee from “poaching” the employer’s other workers or customers for another company for a certain period after the employee’s termination. Non-compete clauses preclude employees from launching competing businesses or going to work for the employer’s competitors in a specific geographic region and for a certain period.