What Are Common Clauses in a Severance Agreement?

  1. Severance Agreement
  2. What Are Common Clauses in a Severance Agreement?
Why Would An Employer Offer A Severance Agreement?

Although not required under Tennessee law, an employer may offer or agree to a negotiated severance agreement. Just as an employer is not required to offer one, an employee is not required to agree to a severance package if they do not accept its terms. There is much to know about severance agreements, including the common clauses they may include. Both business owners and employees should become knowledgeable about them and how to use them for the greatest benefit.

Negotiating a Severance Agreement

Severance plans are generally used to provide some sort of financial support to employees who lose their job through no fault of their own. In return, the employer gets a waiver of legal claims connected with the employment relationship.”

Some employers have existing severance agreements while others negotiate them on an individual basis. Employees can also negotiate the terms of a severance agreement to get the best possible benefits. These typically include:

  • Separation Pay: a few weeks of pay for every year worked is fair, but don’t feel limited. Ask for a lump sum, and aware of any taxes that will be due.
  • Insurance Coverage: ask for continued insurance coverage until you find another job or make other arrangements.
  • Paid Time Off: be sure to obtain payment for any earned and unused paid time off, like vacation or earned paid sick days.
  • Stock Options: if you own stock in the company, be sure to get the most out of it, including when and how you can use it, sell it or other options.
  • Placement Assistance: if you wish, ask if your employer could pay for placement training or assistance for several weeks or months.
  • Company Perks: ask if you may keep company-provided equipment, like computers or tablets. You may also wish to continue a company-sponsored health club membership.

Remember that your length of tenure and work reputation may grant you significant leverage in severance negotiations. The company may wish to offer substantial benefits or perks to protect their reputation.

What Clauses are Typically Included in a Severance Agreement?

An employee may likely possess knowledge that could be detrimental to the company or could benefit competitors. For this reason, severance agreements typically include several clauses an employee must agree to in order to get a benefit package. The most common ones are briefly discussed below.

  1. Confidentiality Agreement – A confidentiality agreement, also called a Non-Disclosure Agreement (NDA), is a legal agreement that binds one or more parties to non-disclosure of confidential or proprietary information.
  2. Release of Claims – In this clause, the employee agrees to give up any legal causes of action against the other party; former employees are not allowed to levy a lawsuit against a former employer.
  3. Non-Disparagement Clause – Here, the employee agrees to refrain from making any negative statements or communications about the company, its products, services or leaders.
  4. Waiver of Employment – The departing employee may not be rehired by the same company.
  5. Denial of Liability – The departing employee releases the company for any current or future liability over any claims.
  6. Reference Checks or Referral Letters – this prevents the company from offering a negative reference concerning the employee to prospective employers. Some companies may also agree to a positive reference letter the employee can use when applying for other employment.
  7. Non-Compete Clause – this ensures the employee will not enter into competition with their former employer by using company resources.

Get Help with Severance Agreements in Tennessee

Businesses and employees in Tennessee need the help of an experienced Memphis Severance Agreement Attorney when dealing with severance agreements. The Crone Law Firm can help you negotiate severance packages or handle disputes over severance agreements. Contact us to learn more.

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