Articles Posted in Severance Agreements

It happens everyday. Employees are let go for poor performance or lack of work. After the decision to terminate has been made, employers must consider whether to offer the employee additional pay or benefits in exchange for a release by the employee of all claims he or she may have against the employer.

A separation and release agreement is simply the contract used to document the understandings reached by the parties. In addition to the severance payment and release, the employer might agree to provide a neutral reference or outplacement services for the employee. The agreement might also contain an agreement by the employee avoid working for a competitor for a period of time.image

When should an employer consider a separation and release agreement? The following situations are typical:

Layoffs and reductions in force were the topics of a seminar we presented yesterday, during which we reviewed how to plan and implement workforce reductions, requirements for severance agreements and releases, and alternatives to layoffs.shutterstock_21093820

In following up to yesterday’s discussion, here is a list of the “Top 10 Layoff Tips”: 

1. Plan your business first.

Many employers use severance agreements as a way to protect their business from legal liability arising from terminating employees.  Larger companies sometimes use them in just about every termination, while most smaller companies are more selective–offering severance packages only when there is a particularly volatile situation or where there is already a suspicion that the employee will try to sue.  Here are the Top 5 tips that every employer should know about severance agreements before offering one to a soon-to-be former employee.

Who Should Be Offered a Severance Agreement?

The modern school of thought says that employers should consider offering a severance package to all persons who are laid off during a reduction in force (RIF) contract or agreementand to any employee who, for whatever reason, may be particularly inclined to sue. 

Some employers offer severance agreements to every person they terminate.  This becomes problematic, though, when they find themselves having to offer to pay money to an employee with serious policy infractions.  For example, do you really want to offer severance to an employee who is being terminated because he was found to have harassed several female employees?  Probably not.  And he’s probably not likely to sue the company.  But, because they’ve always given severance, the employer is hesitant not to do the same for this employee. 

There are good reasons to terminate an employee.  There are also plenty of bad reasons.  And then there are really bad reasons.  This story is an example of the latter. 

cops for cancer 2

A waitress in Owen Sound, Ontario, was “laid off” after she had her head shaved for a cancer fundraising event.

Stacey Fearnall (pictured) raised more than $2,700 for charity, but when she showed up for work and refused to sport a wig for her shift, her boss told her to take the summer off.

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