Neither the Fair Labor Standards Act (FLSA) nor Florida state law requires employers to offer severance pay to departing employees.
That said, there is no standard template for severance agreements. These contracts can vary depending on the employer, industry and specific situations.
However, there are common elements that most employers include in their agreements. If you are unsure how to draft yours, here are several elements you should consider.
Severance benefits
Most employers offer severance benefits to laid-off workers or workers whose positions have been eliminated. While there are no specific guidelines for these benefits, you might want to consider these common offerings:
- Severance pay, which can be a lump sum or paid out over time
- Continuation of health insurance
- Job search assistance
- Extended benefits for life insurance or disability coverage
It will be mostly up to your company to decide what benefits to offer and how much. However, you must ensure that all your benefits align with the law and preexisting contracts.
For example, suppose one employee has a contract promising 3 months’ severance pay if laid off. In that case, you must honor that agreement, even if other employees receive less.
The Consolidated Omnibus Budget Reconciliation Act of 1995 (COBRA) also plays an important role. This law applies to businesses with at least 20 employees on more than 50 percent of their usual business days in the previous year.
According to COBRA, employees should remain covered under their employer’s health insurance for 18 months after leaving the company.
Confidentiality clause
A confidentiality clause helps protect your company information, including trade secrets, financial data, client lists and other sensitive business information.
Noncompete clause
Some companies include noncompete clauses to prevent former employees from working for competitors for a specified period. These clauses are more common in companies who have a lot of information to protect and work in a highly competitive market.
However, these clauses have certain limitations. For instance, some noncompete agreements only last for a few years and are not applicable to out-of-state jobs.
Legal guidance can help you draft a fair severance agreement
Even though there are limited rules for severance agreements, they must be legally sound. Otherwise, you might expose your company to unexpected legal risks.
Consider working with an attorney experienced in these kinds of agreements and can help ensure legal compliance.
