The Chicago Bar Association

Understand that Both Monetary and Non-Monetary Terms of the Severance Agreement Have Value

(To You and/ or the Employer) and may Very Well be Able to be Negotiated

Direct monetary severance (either paid in a lump sum or over time) generally is the most important term in the severance agreement, but there are many other terms and facets to a severance agreement that can be extremely important and should be considered. For example:

  • Check how the severance agreement addresses any outstanding money/benefits that may be owed (e.g. bonuses, commissions you’d already earned or were about to qualify for, vested and not-yet-vested stock options, profit sharing, PTO days, accrued vacation pay, etc.).
  • Check whether the Employer is agreeing to pay your health insurance during the period of the severance, or is the Employer just offering salary (and look into when your health insurance/ payments will be discontinued).
  • Are outplacement services important to you? If yes then you may want to request it if it is not in the offer. But if you are not interested in it, and it is in the offer then you might want to try and trade it for more severance or for something else of value to you.
  • Make sure the severance agreement does not contain language that restricts your ability to work for other employers or in certain fields of employment or locations (restricted covenants - non-compete/ non-solicitation clauses).
  • Review confidentiality terms closely, and make sure that you understand them and start to abide by them immediately.
  • Check to see if there is a non-disparagement clause (that you are not to disparage the Employer, which protects the Employer), and likewise if there is a neutral reference clause (that would be protecting you from the Employer saying negative things to a prospective or future employer - which oftentimes is of critical importance to individuals).
  • Make sure the severance agreement includes language that does not hurt your prospects of receiving unemployment compensation benefits.
  • Review the severance agreement for penalty clauses (such as your forfeiture of severance in the case of a breach of any of the terms of the severance agreement - even for a breach that did not cause the Employer to suffer any monetary or other damages) or liquidated damages (that likewise can be disproportionate to harm).
  • Review the severance agreement for one-sided or unfair terms (such as you being responsible for the Employer’s attorney fees and costs in connection with a breach - which can financially wipe you out).

Because you are not familiar with what are standard terms for a severance agreement, and language within the proposed severance agreement may have much legalese and hidden meaning, you should hire an attorney to review (and potentially negotiate) the severance agreement.

As mentioned in the preceding section, knowledgeable attorney (such as myself) will also be able to better assess the likelihood of your obtaining more severance, and will be able to have more leverage than you alone to negotiate more and better severance for you. In this regard, the Employer will well-know that your attorney knows the law, and will know how to file an EEOC Charge of discrimination or a lawsuit against the Employer without great difficulty, while the Employer may not have the same fear/ concern that you on your own know or are able to do this - this is leverage that you alone likely do not have, but that you with an attorney would have.

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