A Business-Minded Approach To Employment Law

Crafting an effective severance package

On Behalf of | Oct 14, 2023 | Employment Law |

In the business world, parting ways with employees can be a challenging task.

To ensure a smooth transition and minimize the risk of legal complications, businesses must carefully draft severance packages.

1. Clarity in documentation

Begin by outlining the terms and conditions of the severance agreement in plain language, avoiding jargon and legalese. This ensures that the departing employee fully understands the agreement’s terms and conditions. Use specific and detailed language to describe the severance benefits, such as salary continuation, continued healthcare coverage and any additional perks.

2. Non-disclosure and non-disparagement provisions

Including non-disclosure and non-disparagement provisions in a severance package can be instrumental in safeguarding a business’s interests. Non-disclosure clauses prevent the departing employee from sharing sensitive company information or trade secrets with others. Non-disparagement clauses prohibit the employee from making negative statements about the company or its employees.

3. Consideration of time and consultation

Rushing the process of creating a severance package can lead to mistakes and potential legal challenges. Offering the departing employee an opportunity to review and seek advice on the agreement with an independent advisor can help ensure that the agreement is fair and mutually beneficial. Moreover, some laws require a waiting period for the employee to consider the offer, adding an extra layer of protection.

4. Release of claims

A well-structured severance package often includes a release of claims provision. This means that the departing employee agrees not to bring any legal claims against the company in the future in exchange for the severance benefits. Clearly state the scope of this release, specifying the covered and not covered claims.

Approximately 12% of legal actions taken against a company are employment-related. A well-crafted severance package can foster goodwill and avoid costly legal disputes, ultimately benefiting both parties involved.