4 Ways Severance Packages Compromise Future Employment

Are you leaving your job? If so, your employer may have offered you a severance package. There are a few helpful things to know as you proceed. A severance package may work in an employee’s favor in an employment dispute, but an employer may also use a severance package to their advantage. Additionally, you may run the risk of your employer not honoring the severance agreement.

A severance agreement ensures an employer covers its legal bases. When you are presented with a severance agreement, be sure not to sign the contract before you completely understand the rights you are signing away — you may be agreeing to severance terms that compromise your future employment opportunities.  Additionally, you will most likely be asked to sign away your right to pursue legal action against your former employer for any employment-related issues, so you will want to be sure to weigh any legal causes of action you are agreeing to forego versus the value of the severance package.

4 Ways a Severance Package Can Compromise Future Employment Opportunities

Though a severance agreement may include an ample severance package, it likely will also include provisions that could pose significant harm to your professional career and legal rights. Watch out for these signs of bad employment severance contracts:

1. An Unfair Nonsolitication or Non-Compete Agreement

A non-compete agreement is a clause in an employment contract that prohibits you from working for a competitor of your employer. This clause typically applies for a certain amount of time, sometimes up to several years.

Though the courts may not favor nonsolicitation or non-compete agreements in severance packages, they are typically enforceable if properly written. At the beginning of your position with your employer, you may have been asked to sign a nonsolicitation or non-compete agreement. In some cases, you may be asked to sign a nonsolicitation or non-compete agreement only when you are leaving your position.

This type of agreement does not always compromise your future employment opportunities, depending on your employment plans and the compensation you receive in your severance package. However, in certain circumstances, nonsolicitation or non-compete agreements may compromise your ability to earn a living, particularly if these agreements are overly restrictive.

How do you know if a nonsolicitation or non-compete agreement is too restrictive? These agreements are overly restrictive if they:

• Cover a large geographic scope.
• Restrict too many activities.
• Last a long time.
• Add restrictions that were not already in place as a result of a prior agreement.

For instance, does your nonsolicitation or non-compete agreement last several years? Does the agreement encompass an entire state? If so, you may be forced to move or even change careers in the future.

Though a nonsolicitation or non-compete agreement that is too broad and restrictive may not be enforceable, you may compromise your future employment opportunities if you honor the unfair contract. Look out for overly restrictive non-compete or nonsolicitation agreements and negotiate these agreements for your severance package.

2. A One-Way Non-Disparagement Clause in the Employer’s Favor

A severance agreement may be a sign that you and your employer are not departing on the best terms. For instance, an employer that has engaged in employment discrimination may ask you to leave and remain quiet about the problem in exchange for a significant severance package. Regardless of the reason, your former employer may be asked at a later date what caused you to part ways with the company. If the reason you left the employer paints you in a negative light, you may struggle to find future employment opportunities.

To get around this issue, employers may include a non-disparagement clause in the severance agreement. In this clause, each party is not permitted to say anything negative about the other party. Since the severance agreement is drafted by the employer’s lawyer, the non-disparagement clause typically restricts only the employee and does not restrict the former employer.

Fortunately, you may be able to negotiate a severance package with a non-disparagement clause that applies to both you and your former employer so both parties cannot say anything negative about the other. By avoiding a one-way non-disparagement clause, you can make sure the severance package does not compromise your future employment opportunities.

3. Admission of Wrongdoing in the Severance Agreement

Are you leaving your employer because of your own misconduct or an accusation of misconduct? If so, you may want to ensure there are no findings regarding that wrongdoing in your severance agreement. Doing so is particularly important if your alleged misconduct did not occur.

If you admit to wrongdoing through a severance agreement, you may face legal repercussions that could significantly compromise your future employment opportunities. Even if you do not face criminal charges, admitting to wrongful behavior may result in the revocation of your professional certification or licensure, and you may need to change careers altogether.

If you believe you need to agree to wrongdoing in your severance agreement, you may want to have an experienced attorney review your agreement to ensure you will not face professional problems in the future. If a severance agreement may cause problems for you in the future, you may decide it is in your best interest not to sign the agreement — regardless of how much compensation the severance package provides.

Admitting to misconduct could significantly limit your employment opportunities in the future, so you may want to consult an employment attorney before you sign a severance agreement.

4. A Strict or Non-Mutual Confidentiality Agreement

Finally, a severance package may compromise your future employment opportunities if it includes a confidentiality agreement. Your employer may include this agreement to ensure other employees do not find out how much compensation is included in your severance package.

You may want to keep the terms of your departure from your employer confidential. If a confidentiality agreement is included in your severance agreement, ensure the clause is mutual. You may also want certain exceptions included, such as the ability to disclose departure term information to your family members, financial advisor or lawyer.

Schedule a Free Consultation With Weisberg Cummings

Our lawyers at Weisberg Cummings, P.C. can assist you with your severance agreement. When you have been wronged by an employer, we will utilize our decades of experience in law to stand up for your rights. We provide each of our clients with personalized service. We will learn as much about your situation as possible when you choose us for legal representation. Our lawyers have resolved a variety of workplace disputes and severance agreement issues for many clients.

If you are concerned about your severance agreement or want to negotiate a severance package, contact us today to schedule a free consultation.

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