While organizations are not legally required to offer a separation agreement — and are usually subject to low legal risk if they don`t, lawyers say — most advise their clients to put one on the table, if only to ensure security against possible future litigation. Think about how and when you can communicate your policy. Some employers include their severance pay directive in their employee handbook or publish their policies online. This approach has the advantage of being easily accessible to staff, but it carries legal risks – for the same reason. “Even if a company wants employees to know that it intends to take care of them in the event of a layoff, it may not be able to pay these benefits when the time comes,” Calli says. “If a severance pay policy is mentioned in the personnel manual, this could be interpreted as an implied promise to which the employer is contractually bound.” Severance can also help a company achieve its financial and business goals, Calli says. While some executives oppose the idea of paying employees who aren`t working, it can save money in the long run, especially if offering severance pay helps reduce unemployment insurance costs. In addition, in situations where workers know that a layoff is imminent, employers can take advantage of the promise of severance pay to encourage workers to stay as long as they need to instead of seeing them leave in droves in search of new jobs. A severance pay agreement – also known as a “separation agreement” or a “severance pay agreement” – is a good quality document between you, the employer and the outgoing worker that sets out all the specific conditions for the employee`s dismissal.
Uncompetitive bankruptcies are another area you need to pay attention to. Because some states have limited their scope of application through laws or court orders, “competition prohibitions in severance pay agreements may raise issues,” Rees said. For example, non-compete prohibitions are generally not applicable in California. But it is precisely for companies operating in several states or jurisconsults that the correct constitution of an agreement is not necessarily an easy process. “You really have to consult a lawyer because it all depends on the law of the state,” Chung said. “There are so many nuances.” For example, you can upload a template from the internet or even have your attorney create a company-wide document that doesn`t work in any state. “You have to do your due diligence to make sure you maximize applicability,” she said. Severance can help cushion the blow of a layoff or layoff. But let`s be honest: most companies offer it with more than the interests of employees. “We live in a very contentious society, especially in the area of employment,” says Jonathan A. Segal, an labor law specialist at Duane Morris LLP in Philadelphia. “Employers can buy peace by offering severance pay or other benefits in exchange for a [signed] release that states that the outgoing worker will not sue the company.
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