What’s in a Separation Agreement?
by
Joseph C. Maya on Feb. 21, 2024
Summary: With the economy where it is, the employment lawyers in the Westport, Connecticut office of Maya Murphy, P.C. are frequently asked to review and negotiate separation agreements for terminated employees. These agreements often appear similar in form and content but must be carefully scrutinized, as they can contain hidden “trip wires” that can have a profound and long-lasting effect on the former employee’s job prospects. Here are some of the things to look out for.
Most separation agreements contain restrictive covenants—confidentiality, non-solicitation, or non-competition clauses. The first two—confidentiality and non-solicitation—are typically non-controversial, as they often confirm pre-existing obligations owed to an employer by a former employee. The last—non-competition—is usually a point of contention, as it impacts directly the employee’s ability to find a new position. We have blogged extensively on non-competes, their interpretation and enforceability, etc. and readers are invited to review those prior posts. But other terms and conditions of a separation agreement deserve your attention, as well.
First of all, do not be surprised by the length of a separation agreement. A federal statute called the Older Worker’s Benefit and Protection Act requires the inclusion of extensive release language, and such things as a 21 day review and seven day revocation period. Here are some of the other things you should be on the lookout for:
Consideration:
Make sure all of the severance benefits are correct and clearly stated. This includes severance pay, COBRA coverage, etc. Do not leave anything to inference or implication.
Confirmation That No Claims Exist/Covenant Not to Sue:
Notwithstanding the comprehensive release language, some separation agreements will also require the employee to state that he/she is not aware of any factual basis to support any charge or complaint and that the employee will forego suit, even if such a claim exists.
Non-Disparagement:
Both sides often agree that neither will say anything to disparage the other. Sometimes (particularly in the financial industry), a separation agreement will contain a “carve out” for employer reporting to FINRA or the SEC. In such a case, it is important to have the agreement state that as of the employee’s separation date, the employer was not aware of any reportable event or information that would warrant comment or notation on a Form U-5.
Governing Law:
Employment law does not travel well across state lines. For example, California law is much different than Connecticut’s. Large companies will sometimes have their separation agreements governed by the law of the state where it has its headquarters, irrespective of the actual place of work of the departing employee.
Acknowledgement of Non-Revocation:
An employee has seven days within which to revoke acceptance of a separation agreement. Some companies adopt a “belt and suspenders” approach and require the employee to acknowledge in writing a negative—that they have not revoked such acceptance.
Maya Murphy P.C. has proudly been included in the 2024 Edition of Best Law Firms®, ranked among the top firms in the nation. In addition, Managing Partner Joseph C. Maya has been selected to The Best Lawyers in America® 2024 for his work in Employment Law and Education Law in Connecticut. Recognition in Best Lawyers® is awarded to firms and attorneys who demonstrate excellence in the industry, and is widely regarded by both clients and legal professionals as a significant honor.
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If you have any questions about employment law or education law in Connecticut, or would like to speak to an attorney about a legal matter, please contact Joseph C. Maya and the other experienced attorneys at Maya Murphy, P.C. at (203) 221-3100 or JMaya@Mayalaw.com to schedule a free initial consultation today.