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What to look out for before you sign that severance agreement

Posted on August 10, 2018

If you’ve been offered a severance package upon losing your job, you’re likely relieved that at least your income and benefits will continue for some time as you look for another job (or take a long-needed vacation).

However, before you sign that severance agreement, make sure you understand what you’re agreeing to. If you violate any of the terms, you may not only lose that income, but you find yourself in legal jeopardy.

There are some potential “landmines” in severance agreements that many employees don’t notice or don’t fully understand until they’ve violated them. Following are a few of the most common clauses to look out for:

Noncompete

These are common in industries where employers are concerned about competitors taking their top talent. If your agreement has such a clause, you may not be allowed to work for a competing company for a designated period. You may also be forbidden from hiring employees from your old company when you land somewhere new.

Like many parts of a severance agreement, this clause can be negotiated. You may ask to lessen the noncompete period or amend the geographic region to which it applies. This clause can inhibit your ability to make a living in your field, so be careful.

Proprietary information

If you’re privy to trade secrets, designs and information that competing companies would love to have, you may be forbidden from using what you’ve learned in your job somewhere else. You may be able to ask for exceptions to this clause if the information relates to something you helped develop or create.

Integration

This is a clause you want in your agreement. It means that it includes anything your employers have verbally or otherwise promised. If it’s not included, they’re under no legal obligation to stand by it.

Release of claims

This is a standard clause in severance agreements. It means that you can’t turn around and sue your employer. If you don’t have any pending legal action or foresee any, there’s generally no problem with this clause. However, if you do, think carefully about whether you want to drop that action or take away your ability to sue later.

It may be wise to have an attorney review and evaluate your entire severance package and suggest areas where negotiation of the terms may be in order. This can help protect your professional and financial future.