What should I look for in a severance package agreement?

Receiving severance can be helpful for people in Washington, D.C., who have lost their jobs, but the terms of the agreement should be reviewed carefully.

In July 2016, there were 373,400 people employed in Washington, D.C. Another 23,400 people were unemployed, according to the D.C. Department of Employment Services. Many people who have lost their jobs may qualify for unemployment. Some may even be eligible for severance payment from their employer.

As the U.S. Department of Labor points out, there is no federal law that demands a company to provide employees with severance pay. Instead, these packages typically arise from an agreement between companies and workers. When these contracts are in place, the business must abide by them.

Where to find information

The terms of severance are typically outlined in a contract that the employee signs either before starting work or after discovering that he or she is going to lose the job. It is also possible that an employee handbook will outline how the company handles severance. This information should be reviewed carefully to ensure that the worker understands the terms.

Identify the terms

Signing a severance agreement is typically much more than just accepting a certain amount of money. There are often non-economic terms assigned to the agreement. For example, the employer may include a noncompete clause that restricts where the employee may work if he or she signs the document. This could be detrimental to the worker in terms of finding other gainful employment.

It is also possible that the agreement will include a line that states that the worker may not sue the employer upon accepting the agreement. In some cases, this may not be an issue. However, people who have believe they may have been discriminated against in losing their job, or someone who thinks there are unpaid wages on the table, may be wary of losing the right to file a claim.

Determining if it is fair

Because there is no law dictating how much a severance package should be, employers have the right to set the pay however they choose. Some may opt to simply provide the worker with a few weeks' pay, while others will have a formula that bases the pay on the current wages and how long the employee has been with the company.

It is possible to negotiate these contracts. Many will come with a deadline by which the employee is required to either accept or reject the offer. That time could be used to consult with a legal professional who can review the terms and help negotiate a better deal.

Generally, people should avoid signing a severance agreement until ensuring that the terms are fair. Anyone who has questions about this topic should speak with an employment law attorney in Washington, D.C.