My employer is offering severance in Texas. Should I sign the severance agreement?
Ultimately you will have to sign the severance agreement if you want the money or whatever benefit they offer; but that does not mean you should sign it without carefully considering the terms. There are basically three types of severance agreements with employers in Texas. I call them the “let’s just be friends” severance; the “business defense” severance; and the “shush and go away” severance. Although each has a different purpose, any severance agreement might include elements of others or might have multiple purposes. Most people will accept severance agreements because they want the money more than whatever the company wants in return; but sometimes it pays to negotiate the benefit and/or the terms of the agreement. Texas employment lawyers can help you determine the proper course of action for you.
“Let’s Just Be Friends” Severance Agreements in Texas
The “let’s just be friends” severance agreement is normally for entry level to low-level management employees during reductions in force. The purpose is really to end the relationship amicably and tie up any loose ends. Usually the company offers some additional cash as a flat amount or some calculation of salary and service time. It may also offer to extend health benefits or add incentives to a retirement plan. Since lower level employees usually don’t have access to sensitive company information or client files, these employees normally pose little risk of harming the company by going to a competitor or starting a competing business. If your employer offers a severance agreement like this then you should contact an employment lawyer to review it for you.
Employers may have other reasons to offer severance benefits
However, the company may have many other reasons to offer severance benefits. They may want to avoid bad PR by releasing employees without any transitional assistance. They may want to keep a positive impression in case they want to offer them jobs in the future. However, companies are usually most concerned with having the employees agree to release them from any future lawsuits. That allows them to tie up those loose ends and not risk discrimination and other claims.
Many employees will not file discrimination charges or workplace safety grievances while employed for fear of losing their jobs; but when the job goes away so does that fear. The likelihood of some legal action grows. By having employees waive those claims the company can avoid all of that. If you have no reason to believe you have a claim against the company, the severance package is probably a good deal but you still may want to have an attorney review it. However, if you do have a claim, the severance agreement is probably not a fair amount to settle your claim.
“Business Defense” Severance Agreements in Texas
This is what I call the severance agreements offered to mid to upper-level management, sales people and any other employee with access to confidential and proprietary company information. These agreements go to those employees who have potentially detrimental information to the current employer in the hands of future employers. This can range from knowledge of the employer’s processes and products/services to sensitive information that could harm the company’s reputation to knowledge of clients or how clients are captured in a particular market. These agreements normally trade money and/or benefits for certain agreements like non-compete agreements that prevent you from competing in the same marketplace and confidentiality agreements, along with releasing the company from any claims you may have against them.
Most employees agree to confidentiality clauses in their employment agreements or by accepting employment through the terms in the employee handbook and these clauses protect the company in certain ways but some information the company would like to keep confidential really cannot be made confidential. A simple example is with a non-compete for a salesperson. If you sell paper for Dunder Mifflin, the company may have made you agree to keep client names and information confidential; but if you go start your own paper company, how can you not to know that local law firms or publishers need paper?
Non-compete agreements in Texas
The only way to exclude you from using that obvious information and your prior relationship with those clients is to exclude you from selling in that market through a non-compete agreement. Alternatively, there may be events you were involved in or witnesses that were legal but would damage the company’s reputation. Some of that may fall under a confidentiality clause during your employment but may not control once you leave. A severance agreement can extend that confidentiality.
These agreements can sometimes be negotiated for greater value; but a lot depends on job duties and what the company wants to restrain. Unlike the more platonic agreements above, the company has something very specific it knows you have that it wants to protect, so the benefits to the employee need to fairly reflect that value. The language may be very broad and sharply diminish your ability to gain future employment. The terms of the agreement may need to be negotiated as well.
“Shush and Go Away” Severance Agreements
These are the agreements for employees that employer knows or seriously fears have claims against the employer. Here, the employer trades the value of your claim for a quicker resolution and confidentiality. These agreements can be a win-win for both the employer and employee; but sadly most employers offer far too little in the agreement in exchange for releasing a viable claim against it. That means you really need Texas employment lawyers to evaluate the value and often negotiation can increase the amount substantially.
Texas employment lawyers to review severance agreements
If you receive a severance agreement, consider consulting with an employment attorney to protect your rights. Should you need assistance, contact my office today to schedule a consultation. Severance agreements often come with short time periods to review and accept the offer. If you receive a severance offer you should move quickly to contact employment lawyers in Texas.