What should be included in a severance package?

 

Attracting top talent to your company often means creating employment agreements that contain a severance package.  Experienced, senior-level professionals expect it.  But you may be asking yourself, “what should be included in a severance package?”

A severance package is pay and benefits an employee is offered when they end their employment with a company.  Sometimes customized severance packages are negotiated during the hiring process as part of an employment agreement, and other times they are across-the-board standardized packages created by a company for every departing employee. These agreements can differ from industry to industry, depending on the norms of your given field, but all good severance packages should have certain legal elements that enable you to hire outstanding talent while making sure your company is protected when employees leave.  Severance agreements are binding contracts designed to settle or prevent any disputes between the two parties.

Attorney Andrew Weisblatt has years of experience crafting customized business contracts that include both employment agreements and severance packages.  Depending on your company’s goals, Mr. Weisblatt can draft an individual severance package or company-wide employment agreements.  To learn more about how the Weisblatt Law Firm can help, call us at 713-666-1981.  The initial consultation is free.

 

What is an appropriate severance package?

 

If you’re wondering what is an appropriate severance package, the answer must take into account both the employee’s seniority level and years of employment, among other things.  Items that can be included in a severance package are:

 

  1. Compensation

This is the amount of salary or money that will be paid to a departing employee.

  1. Medical insurance benefits

This refers to whether medical coverage will be offered to an employee upon leaving and for how long.  Most employers are required to facilitate COBRA gap medical coverage.

  1. Unused vacation or sick leave

Any accrued but unused sick, vacation and PTO time must be paid at the time of severance.

  1. Stock options

For employees who have earned stock options during their time of employment, a severance package can lay out guidelines for when and how these options can be exercised.

  1. Bonus payments

If an employee is entitled to a performance bonus, a severance package should include this.

  1. Non-compete agreements

In some industries, it is typical to have severance packages that include “non-compete” clauses, which stipulate that a departing employee cannot take a similar job in the same geographic area with a competitor for a set amount of time (for example, one year).

  1. Non-solicitation of employees or customers

This is a very important element of a severance package which states that a departing employee cannot recruit current company employees or lure away current customers after the employee leaves.

  1. Outplacement assistance

Sometimes employers will offer “outplacement assistance” to departing employees, which includes career coaching and resume writing.  This is particularly common as part of a corporate downsizing or merger.

  1. Non-disparagement

This often-overlooked element of a severance package includes a paragraph stating that a departing employee may not publish or otherwise communicate disparaging remarks about your company after leaving.  It can often include a definition of “disparaging” so that everyone is clear on what this means.

  1. General release of liability

This element is a general release by the departing employee that prevents a them from holding your company liable for any and all legal claims now and in the future, known or unknown.  This is designed to prevent future lawsuits.

  1. References

This section discusses how the employee’s references will be treated if they call or email as part of the employee’s future job-hunting activities.

  1. Dispute resolution

This is a paragraph stating that the employee and company agree to arbitrate rather than litigate any differences of opinion.

  1. Confidentiality

This language requires terminated and departing employees to maintain confidentiality about company research, practices and intellectual property after leaving.  It also often requires that the terms of the severance package be kept confidential.

  1. Company property

This requires departing employees to return all company property, including computers, phones, electronics, keys, and other equipment.

 

Some highly specialized severance packages can contain other elements in addition to the items listed above. A skilled and experienced business attorney can advise you about which elements should be included in your company’s severance agreements.  To learn more, call attorney Andrew Weisblatt at 713-666-1981.

 

How to offer a severance package

 

The way to offer a severance package can depend on whether the employee’s departure is a termination for bad behavior or simply a professional departure to take a new job.  Generally, severance packages are handled through a company’s human resources department, unless it’s an executive-level employee with an employment contract.  In this case, severance discussions are often handled by each party’s attorneys.

Attorney Andrew Weisblatt not only crafts employment agreements and severance packages on behalf of companies, but he is also happy to review a severance package on behalf of a private client who is negotiating their own departure.

 

Contact a skilled business attorney today

 

There are a lot of underlying legal considerations when building a company and hiring employees.  A skilled business attorney can partner with you to make sure you have the legal resources to attract top talent and protect the well-being of your company when employees leave.  Employment agreements and severance packages are an important part of any business’s employment plan.  A well-crafted severance package can prevent headaches and exposure to future liability for a company.  While standardized severance packages may be the best option for employees in general, other situations may require a customized severance package combined with legal negotiations.

Attorney Andrew Weisblatt is highly skilled at both.  He can create a company-wide severance plan for you, and he can craft and negotiate individual severance packages for senior-level employees.  Whatever your legal needs, Mr. Weisblatt has the skills and experience necessary to help your business thrive and succeed.  For a free initial consultation about your situation, call Mr. Weisblatt at 713-666-1981.