What to Know About Severance Agreements

Manager Holding Severance Agreement

Employers often choose to offer their soon-to-be terminated employees a severance agreement. Ensuring the agreement is properly drafted can avoid or minimize the chances of wrongful termination and other lawsuits. The New York business lawyers of Rosenbaum & Taylor assist companies with all aspects of employment law. We can help your company draft, review, and negotiate the terms of your severance packages.

You can contact us today for a free consultation.

Possible Terms to Include in a Severance Agreement

Severance agreements typically provide compensation in exchange for the departing employee waiving legal claims they may have against the employer. Here are some terms and conditions that are typically included in severance packages.


This is a basic element of any severance agreement. It can include commissions, bonuses, unused vacation time and sick leave, unpaid expenses, stock options, and profit sharing. Extending insurance benefits is another option.

Waiver of Legal Claims

In exchange for financial compensation, the employee must waive any potential employment lawsuit. These could include wrongful termination, discrimination, and other employment law claims.

No Admission of Liability

The employer will clarify that agreeing to pay severance should not be construed as an admission of liability. Even though the agreement should be kept confidential (see below) it is strongly recommended that this clause be included.


Employees should be required to maintain confidentiality about any information they obtained while employed. This information includes trade secrets, customer lists, and intellectual property. The terms of the severance agreement should also be kept confidential.


The employer and employee should agree to not speak poorly of each other after the severance package is agreed to. Non-disparagement clauses usually forbid the parties from making negative statements, remarks, or representations about each other.

No Obligation to Rehire

The employer will have no duty to rehire the soon-to-be former employee. This should be explicitly spelled out in the severance agreement.

Post-Employment Restrictions

Employers typically include certain limitations on what the employee may do after departing from the company. Non-competition, non-solicitation, and similar provisions are examples.

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Employers’ Concerns About Severance Agreements

There are legal and financial issues at stake when employers propose severance packages to employees. Careful wording can protect the employer’s rights and interests, making future litigation less likely. As you consider what to include in your severance packages, consult an experienced New York business lawyer.

We can guide you concerning issues like the following.

Nature of the Compensation

How much is the severance really worth and what exactly should be offered to the employee? If you offer insurance benefits, there should be time limits on how long they are available.

Diligent Wording of Legal Releases

It’s critical to ensure that the departing employee can’t take legal action after signing the agreement. This is likely your top motivation for offering severance in the first place. This clause should cover not only civil lawsuits but claims filed with state, federal, and even local agencies and offices.

Confidentiality Exceptions

While confidentiality is essential, reasonable exceptions must be made. For instance, the employee may need to discuss the compensation with a financial or tax advisor. A New York business lawyer can help make sure exceptions are construed as narrowly as possible.

Neutral References

The employee may expect a neutral reference to be given to future prospective employers. Naturally, you as the current employer want as little obligation as possible in this respect. So this clause must be worded carefully.

Reasonableness of Limitations

As mentioned above, non-competition, non-solicitation, and other limits on the worker’s post-employment activities are common. However, these limits must be reasonable or a court might throw them out.

Legal Counsel Is Essential for Your Severance Agreements

Rosenbaum & Taylor knows that employment matters can be potentially risky for a New York business. We endeavor to minimize liability by carefully negotiating and drafting severance packages. In the event litigation becomes necessary to defend the agreement, we can assist with that as well.

Call us today at 914-326-2660 or contact us online to learn more.

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