Severance Agreement Red Flags

When an employee leaves a company, they may be asked to sign a severance agreement. This agreement typically outlines the terms of the employee’s departure, including any severance pay they may receive and any statutory rights they may be waiving by signing. While severance agreements are common and often necessary, there are several red flags that employees should be aware of before signing on the dotted line.

1. Non-compete clauses: A non-compete clause may prohibit an employee from working for a competitor for a certain period of time. While non-compete clauses can be reasonable and necessary in some industries, they can also be overly restrictive, limiting an employee’s ability to find work in their field. Before signing a severance agreement with a non-compete clause, it is important to understand the extent of the restrictions and how they may impact future employment opportunities.

2. Confidentiality agreements: Confidentiality agreements may be included in severance agreements to protect a company’s trade secrets and proprietary information. However, these agreements can be overly broad, prohibiting an employee from sharing information that is not actually confidential or impeding their ability to find work in their field. Before signing a severance agreement with a confidentiality clause, it is important to understand what information is actually confidential and how it may impact future employment opportunities.

3. Waivers of rights: Severance agreements may ask employees to waive their right to sue the company for any claims, including discrimination or harassment. These waivers can be problematic, as they may prevent an employee from seeking legal recourse for any wrongdoing that may have occurred during their employment. Before signing a severance agreement with a waiver of rights clause, it is important to understand what rights are being waived and whether it is in the employee’s best interest to do so.

4. Unreasonable demands: Severance agreements may include demands that are unreasonable or unfair. For example, a severance agreement may require an employee to keep quiet about their departure or agree not to say anything negative about the company, even if they have legitimate concerns. Before signing a severance agreement with unreasonable demands, it is important to understand the impact these demands may have on future employment opportunities and whether they are justified.

In conclusion, it is important for employees to carefully review their severance agreements before signing. By being aware of these red flags, employees can make informed decisions and protect their rights. If an employee is unsure about the terms of a severance agreement, they should consult with an attorney or other legal professional before signing.