Severance agreements are in the news again as it looks like the economy is heading into another down cycle. This means that many of our readers are seeing a severance agreement for the very first time, and they want to know what to look for in them.
What are they?
First, a Pennsylvania severance agreement is a contract between an employer and employee that drives the terms of the employee’s leaving the company. To be valid as a contract, it must, at least, contain some consideration for your signature. This is something of value that you would not be entitled to receive without that signature. For example, your earned pay, sick leave and vacation time cannot be offered as an inducement to sign the severance agreement. In addition, if you already have paid for your insurance up to a certain month, that time cannot also be solely used as an inducement. In other words, your earned pay and benefits cannot be held hostage.
Not necessarily a requirement
Unless you have a contract, there is a company policy or there is a union requirement of severance pay, you are not entitled to severance pay. Severance pay is discretionary, and as a result, employers usually require a release of potential claims in exchange for that discretionary Pennsylvania severance package.
Discrimination waivers and other statutory claim waivers are generally allowable, even if not specifically referred to in the severance agreement. For example, Title VII claims could be released if language is included to the effect that you give up all “claims pursuant to Federal laws.” The employer could not include a waiver of the right to file before the Equal Employment Opportunity Commission instead of suing in federal court.
Common law waivers
Common law can also be waived within the severance agreement. This includes wrongful termination, defamation, etc. And, in future blog post, we will explore more Pennsylvania severance agreement issues to be on the lookout for before you sign.