Employers often ask workers to sign a severance agreement when they leave employment. This agreement may seek to limit the worker’s rights in exchange for severance pay or other benefits.
However, sometimes employers go a little too far with severance agreements. Recently, the National Labor Relations Board ruled that employers cannot use a severance agreement to make a worker waive their rights under the National Labor Relations Act.
This should spark a conversation about severance agreements and what they can — and cannot – do.
Severance agreement basics
Most employment in Pennsylvania is considered at-will. This means that the worker can quit at any time and the employer can terminate employment at any time for any legal reason. Still, it’s common for employers to have workers sign a severance agreement before they leave when they offer severance pay.
Note that severance pay is generally not required by law. Employers offer it in some cases to smooth an employee’s exit in a layoff or other termination situation.
In its basic form, a severance agreement is a contract between an employer and a departing employee. As with all contracts, one of the requirements is consideration. This means that one party must offer something in exchange for something else.
So, in the case of a severance agreement, an employer may offer a departing employee severance pay in exchange for the employee giving up certain rights. For instance, the agreement may ask the worker to waive their right to sue the employer for wrongful termination under the Civil Rights Act or another worker-protection law.
Recent decision
The recent decision by the National Labor Relations Board applies specifically to unionized workers. In the decision, the NLRB ruled that a severance agreement cannot ask an employee to give up their rights under the National Labor Relations Act.
For example, if a worker in a union workplace is terminated, the employer cannot ask the worker to sign a severance agreement that waives their right to seek redress through the union. From now on, the NLRB will find any such agreement unenforceable.
The NLRB decision overturns a policy from the previous administration which gave employers the ability to use severance agreements to greatly limit the rights of unionized workers.
For other workers
The NLRB decision may not apply to every case, but it helps to illustrate why workers should be careful before they sign a severance agreement. It may be a good idea for workers to speak with an attorney before they sign away important rights.