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Should an employee sign a severance agreement?

When an employee is terminated, an employer may offer a severance agreement that sets forth pay and benefits in return for a worker surrendering something, such as the right to sue. Some things should be carefully considered when employers propose severance agreements.

Employers are not required to offer these agreements and employees are under no obligation to sign them. Employees may wish to negotiate for better terms or reject the agreement so they can file a lawsuit. While considering these agreements, an employee should carefully review terms that should be in this contract.

Agreements should contain specific information, such as the date of termination, which can affect eligibility for benefits. Additionally, it is important to know the total amount of the compensation owed to the employee and whether it will be paid in a lump sum, bi-weekly or over another time period. Vacation time earned but not used must also be paid.

Employers should address whether taxes will be withheld from compensation. Employees may be eligible for bonuses in full or at a pro-rated amount depending on the date it was to be awarded. Employers should address whether they will contest unemployment compensation benefits. The receipt of health care benefits needs to be covered in the document. Agreements should address the status of unique benefits offered by the employer, such as profit-sharing or a sabbatical program. Employers may also ask for the return of badges, keys, electronic devices, corporate credit cards and other company property.

Agreements, with more frequency, contain non-compete clauses that restrict an employee from competing against them by working for another company or on their own for a specific time or within a geographic radius. Terms also restrict the use of divulging of confidential or proprietary information. However, this information should be clearly defined in the agreement. In return for benefits, the agreement may require the employee to promise not to file a lawsuit. In addition to the other terms, this should be carefully considered.

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