Should I sign the severance agreement I was offered?

Should I sign the severance agreement I was offered?

On Behalf of | Mar 6, 2023 | Employment Law, Severance Agreements

Layoffs have been in the news of late, and that may make employees in the Pittsburgh area nervous.

Losing a job suddenly is a stressful and traumatic experience. A worker may wonder what they are going to do to support themselves and their families.

Pennsylvania employers know this.

They are also aware that employees have legal options to sue their employers if the employees feel like their layoff or termination was against state or federal law.

Although employers do not have to offer a severance agreement, many choose to do so as a tradeoff.

They give their employee a financial cushion, and the employee in turn waives their right to sue the employer.

Employees should think carefully before signing a severance agreement and make sure they understand their legal options.

Often, employers follow severance pay policies that set out how much severance pay an employer will offer and on what terms.  However, this amount is not always appropriate.

Sometimes, an employee may have some valid legal claims against their employer and would be better off suing their employer either for discrimination or on some other grounds. In other words, it can pay off to ask for additional severance pay.

Higher-level executives should be particularly careful about signing agreements

Companies offer what are called extrication agreements to higher-level executives and managers.

They do so when the company wants to let the executive go but have some legal or business concerns about doing so outright. For example, the executive may have a buyout in their contract or may be able to make out a discrimination case.

Extrication agreements serve the same purpose as severance agreements. The outgoing executive agrees to waive important rights in exchange for their company’s payout and other benefits.

More so than severance agreements, an extrication agreement allows both sides to spell out in detail their rights and responsibilities after the executive leaves.

Extrication agreements also usually allow more room for negotiation between the outgoing executive and the company.

An executive who receives an extrication agreement will want to make sure they take it through a proper legal review before signing it. They may wish to negotiate better terms.