How to make sure your employee terminations agreements are airtight

by on June 1, 2009 · 0 Comment POSTED IN: HR Info Center

Most companies admit for employee terminations, their severance deals are risky

Are you confident that the severance agreements you use with employee terminations will keep you out of court?

If so, you’re in the minority, according to a recent Rapid Learning Institute Publishing survey. Less than half (47%) of companies surveyed say their documents are air tight. And 19% think they are “a lawsuit waiting to happen.”

As you know, employment-related lawsuits have skyrocketed in recent years. Legal experts say that when handling employee terminations, the severance or separation agreement is a last chance to tilt the scales of justice in your favor.

Good risk management
Severance deals are good sleep-at-night insurance, especially if an employee might sue. Powderkeg situations include employee terminations or mass layoffs involving individuals in protected classes, or situations where the documentation to justify your action is skimpy. Employees give up the right to sue your company in exchange for considerations (e.g., cash payment(s), continuation of benefits, early retirement, etc.).

4 tips for getting it right
Employment law experts offer these guidelines to crafting good agreements:

  1. Clarify exactly what rights the employee is waiving. Make sure you’re specific about claims arising out of employee terminations
  2. Allow the employee a week or two to sign (or rescind), and make sure they understand they have the right to seek counsel from an attorney.
  3. Avoid any hint of coercion. Severance deals must be voluntary.
  4. Include a non-compete clause if appropriate. A reasonable non-compete will stand up in court.

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