Severance agreements are a way for employers to manage labor risk during staffing changes. They typically include terms to protect the employer, such as noncompetition clauses and waivers of legal liability, and in exchange give departing employees a compensation package. For the employee, a severance agreement can be a helpful way to ease the financial strain of a job transition. But before signing one, it’s important to understand how it may affect your rights. Here we discuss three major concerns in severance agreements: non-competition clauses, confidentiality obligations, and waivers of liability.
Restrictions on future work can limit your career options
Non-competition clauses are a common feature of severance agreements. Because they can limit your professional options in significant ways, it’s important to take care before agreeing to them. A typical non-compete clause will restrict the kinds of work an employee can do for a period of time after the job ends, so the employee cannot immediately go to work for a competitor or steal clients from the company. A non-compete could prevent you from taking a job you really want, or it could get both you and a future employer into a dispute with your old company.
Recent changes to Nevada law limit the permitted scope of non-compete clauses. Among other things, an employer must compensate employees for agreeing to them, and the compensation must be appropriate for the kinds of sacrifices the employee is expected to make. The scope of the non-compete also needs to be limited to what is necessary to protect the employer, and it cannot impose an undue burden on the employee.
Confidentiality is sometimes more complicated than it first appears
Many employers require their employees to sign confidentiality agreements when they’re first hired. These agreements typically require the employee to keep certain information confidential for a period of time after leaving the company. A severance agreement could extend the term of an employee’s confidentiality obligations or, if a confidentiality agreement isn’t already in place, impose new obligations. Complying with confidentiality requirements can mean more than just keeping secrets. It can also mean taking certain actions, like destroying records, and can extend to limiting who you talk to or work for. In the latter case, what looks like a confidentiality clause could actually be a form of non-compete.
Waivers of liability can undermine your legal rights
Perhaps the most common reason a company will ask departing employees to sign severance agreements is to get the employees to waive all legal claims against the employer. Especially where the employer has engaged in practices that are potentially unlawful, such as racial or disability discrimination, denial of overtime pay, or unwarranted denial of insurance, an employee should think carefully about whether signing a waiver is a good idea. Signing a waiver, especially when it’s accompanied by the sort of compensation that comes with a severance package, can eliminate an employee’s ability to pursue legal action in the future.
Before signing a severance agreement, get help from an attorney
At GGRM we are committed to helping workers in Las Vegas understand and protect their rights. If you have been asked to sign a severance agreement and you have questions about how it might affect your rights, our attorneys would be happy to help. For a free consultation with an attorney call us today at 702-388-4476, or send us a request through our site.