Severance agreements in the state of New Jersey are agreements made upon the termination of the employment relationship between an employee and a company. Sometimes they arise when parties just want to part ways mutually and amicably, where each party offers something that ultimately creates a binding contract. A severance agreement is a contract all on its own. Usually, the company agrees to pay the parting employee a certain amount of money and the employee makes promises back to the company regarding things that he or she, will or won’t do in consideration for receiving the money. For there to be a binding contract, consideration must be provided for in the context of a severance agreement, that is, each party has to give up something, otherwise, the contract will not be binding.
In severance agreements, companies are typically giving you money as an employee because they want to be sure you’ll never sue them for anything that happened during your tenure as an employee for that company. So, 99% of the time, the company will give money in exchange for a release promising that you will not sue them. These are very common in the State of New Jersey.
But again, the devil is in the details. You have to look at the language of the severance agreement like you would any other kind of agreement to make sure additional terms, like restrictive covenants, are not being included. For example, not only do you receive money and promise not to sue me, but you cannot work for a year or two anywhere in the United States, for any competitor! It is always important to consult with an attorney regarding the legal terminology in the severance agreement because it can be very serious. It can impact not only your ability to work, but it can also restrict your ability to earn a living for some time into the future and anywhere in New Jersey, the United States, sometimes the world.
Q: In your experience as an employment lawyer, is it usually a take it or leave it situation, or are you able to negotiate?
It depends on the facts of the separation. Before we ever review a severance agreement, we ask about the facts surrounding the separation from employment. The facts surrounding the separation of employment or the way they were treated on the job may give rise, theoretically, to a claim that is more valuable than what is being offered in the severance package. Severance packages are usually very modest and sometimes employees can negotiate additional money based on the amount of time they worked there. But to make a much larger impact on the amount that is being paid usually requires the help of an attorney who can take the facts of the relationship and spin it into something far more dangerous in the perception of the company that convinces them to pay more money in exchange for that all-important release.