Crafting a Severance Agreement

A Monmouth County Business Attorney Explains the Importance of Proper Documentation

The termination of an employee is one of the most unpleasant aspects of running a business. However, certain terminations may carry the threat of litigation further down the line. If it seems possible that an employee or group of employees will pursue legal action in the event of their termination, a business may find it necessary to craft a severance agreement.

Why Use A Severance Agreement?

A severance agreement is not an admission of guilt for firing an employee, nor are they appropriate for each termination of an employee that occurs. However, there are some situations where an agreement can ease the transition for both parties. Although many written agreements are in the interest of preventing litigation, businesses can also use them for the purpose of securing confidential information and protecting the company against libelous statements from former employees.

There are certain criteria that a severance agreement must meet to be both beneficial and enforceable. When crafting a severance contract, it is important to remember the following:

  • Do not attempt to force or hurry the employee’s acceptance of the agreement – This could lead to claims of coercion, resulting in the litigation you sought to avoid.
  • Give the employee plenty of time to consider the agreement before signing­ – In some cases, the law requires an employee to have at least 21 days to review any severance agreement.
  • Clearly offer some sort of benefit for taking the agreement­ – This benefit usually comes in the form of monetary compensation, although it may include other benefits such as insurance.
  • Make sure the agreement is written in as plain of language as possible – An employee is much more likely to accept the agreement if they can understand it without the help of an attorney.
  • Provide a written suggestion to consult with a lawyer – If the employee is over 40 years of age, the Older Workers Benefits Protection Act stipulates that a business must advise workers of their right to meet with an attorney about the situation. Additionally, companies must allow employees over 40 to revoke the agreement within a certain period after signing.

Each state’s business laws have specific elements that must be included in a severance agreement. To protect your business, it is essential to have an experienced business attorney review the agreement to ensure that it is legally enforceable.

I Need a Business Lawyer in Monmouth County

Our Monmouth County business lawyers can help you ensure that all of your severance agreements and business transactions go smoothly. Before taking any action, call our office at (732) 358-2028 to see how our experienced legal team can help protect your business. We represent and advise businesses throughout Monmouth County, Ocean County and Middlesex County.

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