The basics of a severance agreement

On Behalf of | Jan 17, 2019 | Business Law

Pennsylvania recognizes at-will employment. This means that an employee can be fired at any time with or without cause. On the flip side, an employee can quit a job at any time. Of course, there may be consequences for prematurely terminating employment, especially when that employment is dictated by an employment contract or discrimination has occurred. However, there may come a time when negotiating a severance package is in both parties’ best interests.

Oftentimes, a severance agreement is used to prevent a former employee from taking legal action against the employer, such as for wrongful termination. In exchange, a former employee typically receives compensation and some sort of benefits package. The basis of severance pay can rest on many factors, including: the length of the employee’s service to the employer; the reason for the employee leaving the employer; and even the financial health of the employer.

There may be other matters besides compensation addressed in a severance agreement, including a non-compete clause that restricts a former employee’s ability to work in the same or similar field for a given period of time and within a given geographic reason. Delicately handling these matters can be critical to the future of both the employee and the employer.

Severance agreements can play a pivotal role for both an employer and an employee. When drafted carefully, these agreements can ensure that an employer is not sued for wrongful termination, and an employee can receive the compensation he or she feels is deserved. However, there are many pitfalls when dealing with these agreements, and falling into any one of them may put the agreement’s validity in jeopardy, thereby exposing the parties involved to unwanted consequences under the applicable business law.


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