Chicago Severance Agreement Lawyers 

Here is information from our Illinois employment law handbook on severance agreements:

Chapter 10

Severance Agreements and Employment Contracts

When workers are hired, they occasionally are given an employment contract.  And, when employees are fired, sometimes, they are presented with a severance agreement.  Almost always, there are strings attached like waiving your legal rights.  So, employees should think carefully before signing a separation or severance agreement or an employment contract.

Severance agreements are binding agreements wherein an employee (usually one terminated or laid off) pays the outgoing employee money and/or benefits and the employee usually agrees to give up his or her legal rights to sue the employer for any legal claims.   There are often other significant rights waived in a separation agreement.

Whether to sign a severance agreement frequently depends on the nature of an employee’s termination.   For example, if there was something improper about the termination, an employee may not want to give up their legal rights or may want to negotiate better severance agreement benefits.  If no rights were violated, and severance was not required, it may be that you should “take the money and run.”

Under Illinois law, employers usually don’t need to provide severance to employees that are terminated or laid off.  Despite this, many businesses have implemented severance polices that award employees for their length of service while securing a release of claims from an employee.
Severance packages often include one or more of the following: 

1. severance pay based on the employee's wages,
2. continuation of health insurance and other benefits at the employer's expense; and
3. out-placement services.

Severance packages are sometimes offered in terms of weeks based on the length of the employee’s employment. Of course, each employer will differ in its offer, and employees should be prepared for an offer that may differ from that discussed here. Further, employees should keep in mind that unless the employee has a written employment agreement that provides for a severance upon termination, the employee has no specific right to a severance payment and may not be offered any severance at all.

In offering a severance agreement, the goal of the employer is often to prevent a possible lawsuit as a result of the termination. For the employee, the goals are likely to maximize the amount of money obtained as part of the severance, obtain all of the benefits that she or he is entitled to and ensure that his or her subsequent job search is not hampered by having been terminated. The ultimate goal for both parties, however, should be to reach a fair and equitable agreement that offers adequate protection for both sides.

Many employers make employees sign arbitration agreements.  Usually employees don’t read them but they sign them anyway.  Employees signing these packets often say to themselves:  I need the job and I don’t want to lose it if I don’t sign.  The United States Supreme Court handed down an opinion that holds that arbitration provisions in employment agreements are enforceable even if they strip the employee from his/her right to file their wage and hour claims as a collective or class action.  Epic Systems Corp. v. Lewis, Ernst & Young, LLP v. Morris and National Labor Relations Board v. Murphy Oil, U.S.A., Nos. 16-285, 16-300, 16-307, (2018).  

An employee who is offered a severance package should be prepared to address the following:

• Severance Amount: As discussed above, the amount offered as severance may be based on the length of years an employee has worked at their employment. The amount of a severance can vary greatly between companies depending on the company’s individual policy.
• Health Insurance: The Severance Agreement should detail the continuation of health insurance benefits, how long such benefits will last, and due dates of any payments the terminated employee must make payments by.
• Restrictions/Waivers:  Severance Agreements sometimes contain oppressive and illegal terms that are not standard.
• Re-Employment: The Agreement should set forth terms relating to whether the employee is eligible for re-employment, when they may be considered for such re-employment, and how they may apply for such re-employment.
• Non-Disparagement Clause: A non-disparagement clause provides that neither party to the agreement may speak negatively of the other to third parties. In Severance Agreements, a non-disparagement clause will help employees because their employer cannot make unfavorable comments about them to prospective employers. On the other hand, a non-disparagement clause will help employers because their employee cannot make unfavorable comments to other employees, clients, or customers.
• Release of Claims: A Severance Agreement will likely contain a comprehensive list of the types of claims and lawsuits the employee agrees to give up upon execution of the agreement. Typically, this claim list will be very comprehensive and will contain almost every conceivable claim with the exception of those claims that cannot be waived in a general release.

Sometimes, a severance agreement will also contain a non-compete agreement, which restricts the employee from working a company in the same or similar industry within a geographic area for a specified period of time. A non-compete agreement can greatly restrict an employee’s ability to find a new job.

Talk to a qualified employment lawyer about whether the severance agreement is reasonable and sufficient.