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To encourage you to sign it, your employer might offer severance pay, extra severance pay or a better overall severance package. That's typical for layoffs. Some terminated employees just take the money and run, without fully understanding exactly what it is they've signed and why their employers paid them to do so. But the fact of the matter is, an employment separation agreement is a contract in which you relinquish your legal rights, while the severance is effectively a bribe to influence you to sign it. Conveniently for your employer, it's at a time when you likely need money the most. According to a California labor attorney with whom this writer once consulted, the contract and bribe are legal and binding, if presented correctly. They likely are so in your state, too. If you accept the bribe, you're limiting yourself in taking future legal action against your employer.

So, for one reason, you may not want to sign your separation agreement until you've played out all your options. (See Negotiations in the sidebar.) The fact that your employer is trying to bribe you in the first place, gives you bargaining power. But don't push your luck too much. If you choose to bargain, you are effectively rejecting your employer's first offer with a counteroffer. If your employer doesn't wish to bargain, they will likely honor their first offer. But do be aware that they don't have to offer it again. For that matter, employers are not required by U.S. law to offer any severance. But the courts typically frown on employers demanding that employees sign away their rights, without offering something reasonable in return. That might be your ace in the hole.

You might also think twice about signing, if you seriously think that your employer has wrongfully terminated you under the cover of a layoff (or otherwise), such as for age, race or gender discrimination. You might be able to break your separation agreement in this case, but you might also face more legal hassles than if you didn't sign it.

If your employment separation agreement includes a non-compete clause, you might think twice about signing that too, as it limits the work you may seek at a time when you need work most. That's a big gotcha. It's enforceable in many states, unless it's too restrictive in whole or part. Still, your employer might try to get you to sign the unenforceable anyway, as an intimidation tactic. It happens.

The same goes if your employment separation agreement includes a confidentiality or non-disclosure clause, asking you to agree that you will not disclose or profit from company trade secrets, customer lists, and so on. It's pretty much a no-brainer that you shouldn't disclose or profit from company trade secrets, stolen customer lists, etc. But a non-disclosure clause might limit you in many other ways, too. To be enforceable, a non-disclosure clause must legitimately protect the company's business interests. But again, your employer might try to get you to sign the unenforceable anyway. It's not unheard of for a company to try to protect that which it has no right to protect, such as common industry knowledge.

Natch, employers have the right to legitimately protect their interests. In exchange, most will likely be fair and reasonable. Signing an employment separation agreement probably won't have any ill affects, especially if you need the severance bribe and smell nothing suspicious about your termination. But you too have the right to protect your interests, and it probably comes as no surprise that some American companies act unethically, if not illegally, when protecting their own.

So, the moral of the story is, don't let the bribe alone influence your decision to sign away your rights. As with any contract, it's wise to first read the fine print and look down the road. Before you even speak to your employer about it, see an attorney if you have any doubts about signing your employment separation agreement, any of the clauses within, or any related documents. Your employer must give you a fair amount of time to sign for that very reason. While it might cost you a pretty penny to consult with an attorney for an hour or two, it might save you many more hours of heartache and legal fees down the road.


This article is just a guide and not intended as legal advice. Neither the author nor publisher are engaged in rendering legal services. Please see an attorney for legal advice. Because laws vary by state and are subject to change, neither the author nor publisher guarantees the accuracy of this article.

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