Sometimes when an employee is leaving their job they are asked to sign a severance agreement by their employer. A severance agreement is a contract between an employee and an employer which spells out the rights and responsibilities of both sides in the event the position is terminated. The severance agreement will contain language regarding the amount of severance pay the employee is entitled to in exchange for signing the agreement, and the circumstances under which that pay can be withheld or rescinded if there is a violation of the agreement.
Under Washington State law, severance pay is a gift. It is not legally required for any employer to offer severance pay to a departing employee. However, if a company has a policy regarding severance pay, then that policy can be legally enforced in certain situations.
A severance agreement will almost always require an employee to waive any and all potential legal claims they may have against the employer, including any and all discrimination claims. Federal regulations protecting against age discrimination have mandated that an employee must have a 21 day period to consider the severance agreement before opting to sign it. Although the 21 day period only applies to age claims, employers often apply the 21 day period to the entire agreement. The Equal Employment Opportunity Commission (EEOC) has information on its website regarding severance and waiver of discrimination claims.
If you are offered a severance agreement, it is important to consult an experienced employment law attorney immediately to determine whether you may have a valid discrimination claim before signing the severance agreement, otherwise that discrimination claim against the employer will be permanently barred. An employment law attorney can often negotiate a severance agreement in your favor if it is determined that there may be legal liability you would be waiving, or may advise that you not sign the agreement and instead proceed through the court system.
Finally, it is important to be aware of potential implications a severance agreement can have on unemployment benefits. Generally speaking, if you receive a lump sum payment, it will not affect your unemployment benefits. However, if it is structured as a continuation of salary, it may be considered as “pay” by employment security which could affect your benefits. The Employment Security Department’s frequently asked questions page contains some information on what it considers “severance pay” for eligibility purposes. An experienced employment law attorney can assist you negotiate proper severance language with your employer to ensure your continuation of unemployment benefits.