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Severance Agreements to Manage Risk

There is no requirement under Pennsylvania or federal law for employers to provide severance pay to employees. Severance agreements are contracts entered into between an employer and an employee who has exited employment In a typical severance agreement, the departing employee agrees not to sue the employer for claims related to the employment relationship (such as discrimination or wrongful termination) and, in exchange, the employer agrees to give the employee some form of additional compensation, often called a “severance package.”

The primary reasons for offering a severance package are to soften the blow of an involuntary termination and to avoid future lawsuits by having the employee sign a release in exchange for the severance. In addition, a severance agreement provides an opportunity for the parties to address other issues, such as unemployment compensation, continuation of benefits, outplacement services, job references, and modifications to restrictive covenants.

Keep in mind that federal laws place additional requirements on severance agreements with employees over the age of 40.

Our attorneys can help your business assess whether a severance agreement is prudent and assist in drafting these agreements to ensure effective protections for your company.