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By Jonathan Bechtel
Founding Partner

Severance agreements are commonly used contracts that provide terminated employees with certain compensation, benefits, rights, and obligations. If you are about to lose your job, your employer may ask you to sign a severance agreement.  Almost always, these documents will contain a release of liability, meaning that by signing the document you are giving up certain legal rights that you may have against the employer. Therefore, it’s a good idea to have skilled legal counsel review the agreement so you understand what it provides and what it requires of you. The employment lawyers of Stanfield Bechtel Law are ready to help. Here, we examine a few items you should look for in your severance agreement.

Severance pay

The amount of severance pay is a central component of these agreements. The contract will indicate what amount the terminated employee will be paid and how.

There are two main ways to pay severance: a lump-sum payment or in installments. A lump sum payment will be given to the employee upon or shortly after termination, while installments are paid over some period of time (usually monthly). One benefit of installment payments is that the terminated employee will receive a steady income while searching for a new job.

It’s important to understand that severance pay is contractually binding upon your former employer. Failure to pay you the correct amount on time may give you grounds for a breach of contract claim.


Although termination ends an employee’s claim to ongoing benefits, the severance agreement may extend them for some amount of time. Continued health insurance, life insurance, and job assistance are common benefits included in severance packages. As with severance pay, you have the right to hold your employer liable if it later fails to provide these benefits or terminates them too early.

Paid time off and vacation pay

If you were granted PTO (paid time off) or vacation time which you never used, you may be able to negotiate compensation for it. Benefits like these are often extended to employees as incentives for them to come work for the company in the first place. So if this time was never used, you should negotiate payment or benefits of some kind to account for it.

Termination date

The actual date of termination is important to know because it binds both the employer and the employee. The employer will be required to pay the employee up until termination, so the date should be specified. On the other hand, since the employee is generally obligated to perform his or her work duties until termination, there should be no misunderstanding of when that takes place.

Retirement plan and stock vesting

Vesting gives an employee the right to benefits provided by the employer over a certain amount of time. It is most typically used for granting an employee rights to participate in a company retirement plan or stock options. Vesting schedules are unique to each company. However because the length of employment will affect your vesting rights, you need to know how the severance agreement and termination date may impact it.

Non-competes and other restrictions

The severance agreement will most likely limit your post-employment career activities in some way. One common example is a non-compete clause, which restricts your ability to work for a competitor or start a competing business. Non-solicitation terms, meanwhile, prohibit a former employee from soliciting the customers or clients of his or her former employer. It is also likely that the severance agreement will prohibit or curtail what you can say about your former employer. Finally, the contract may specify that you cannot use certain information, such as trade secrets, gained from your employment.

Helping You Understand Your Employment Rights and Duties

These are not the only terms you can expect to encounter, since every severance package is unique. Our goal is to not only help employees exercise the rights they have but to also make sure they understand their duties. Before you sign a severance agreement, speak with our team. Call Stanfield Bechtel Law today.

About the Author
Jonathan believes the client should always come first, and aims to deliver a positive experience to exceed client expectations.