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The term “severance agreement” is a bit of an ambiguous term that many give different definitions. However, these agreements are highly important and can greatly impact the rights of employees and employers.
A severance agreement is an agreement between an employer and a current/former employee. Generally speaking, a severance agreement will result in an employee resigning and waiving the right to sue the employer for potential legal claims; in exchange, the employer will provide the employee money and/or benefits that the employee would not otherwise be entitled to.
The most important aspect of these agreements is the release. More often than not, the release is what employers are truly paying for. In short, an employer is paying an employee money to release the employer from potential, or actual, legal claims the employee holds.
The release can be highly beneficial to both sides of the agreement and highly detrimental to an employee if they do not understand what they are signing.
The employer will receive peace of mind knowing that they are free from a potentially costly lawsuit. This means an employer can avoid the time, frustration, and potential bad publicity that comes with litigation. Further, the employer will likely be paying less than their worst day in court.
For the employee, this can be helpful to avoid the risks and time associated with litigation. Courts do not move quickly. Many plaintiffs must wait well over a year after they file their lawsuit to get their day in court. Receiving money and/or benefits shortly after an employee ends their employment may assist in their day-to-day life.
However, the employee has risks. The employee will be barred from suing their employer for any harms they have suffered. This may include claims that the employee is unaware they have at the time they sign the agreement.
One important note is that employers are not required to provide severance agreements by law. There is no set rule, law, or guideline that states how much severance (i.e. money) a person is owed. However, an employee may be entitled to a severance payment if they have an agreement with their employer, or if the employer has a written policy stating that severance payments are made at the end of an employee’s employment.
The attorneys at Grewal Law PLLC have the experience to draft, review, revise, and provide legal guidance regarding severance agreements. We are here to ensure your rights are protected. Call our Michigan attorneys at (888) 211-5798 or reach us online to schedule your free consultation.
