Severance Agreements and Packages

Severance Packages to Protect the Employer and Employee Against Future Claims 

Both the employer and employee should usually have a proposed severance agreement reviewed by an experienced and knowledgeable NJ employment law attorney.

As an employee, you may be waiving claims you are not aware of, and more importantly, are not required to waive. As an employer, you may not be addressing key issues to avoid a future lawsuit by a former employee.

Litigation or threats of litigation between employers and (former) employees are clearly on the rise. As a result severance packages coupled with severance agreements are being offered by employers more and more to prevent litigation, avoid adverse publicity, the theft of customers by employees, and a general company policy of fairness, or because a company is contractually obligated by contract or handbook. As an employee, you may not fully appreciate some of the language used in the document or understand the legal consequences of accepting the agreement without legal review. A severance agreement between an employer and an employee should address several important points to avoid misunderstanding, ensure clarity and protect the interests of all concerned. Let me offer some key elements to consider:

  1. Severance Payment: Specify the amount and method of payment, including any taxes or deductions to be withheld. Will payments be a lump sum or installments? What is the timeline for payment and consequences of any default?
  2. Release of Legal and Other Claims: Specificity of potential claims being released by the employee in particular and for that matter, the employer as well should be listed before signing the agreement. Then this document releases the employer from any claims related to the employment, termination, or severance, except for obligations explicitly excluded by the terms of the agreement.
  3. Confidentiality: Identify the employee’s ongoing obligation to maintain the confidentiality of trade secrets, business information, or any other sensitive information made available during their employment.
  4. Non-Disclosure and Non-Disparagement: include a clause prohibiting both parties from disclosing or making negative statements about each other, to protect each party’s reputation. Note in many states including N.J. have adopted recent laws that make unenforceable these kinds of non-disclosure and non-disparagement clauses so check with your attorney on this part.
  5. Return of Company Property: The employee’s obligation to return all company property, including electronic devices, keys, access cards, or any other items belonging to the employer should include a tight deadline under the agreement.
  6. Non-Competition/Non-Solicitation: If applicable, specify any post-employment restrictions on the employee from competing with the employer or soliciting clients or employees of the company. Again, N.J. has very tight laws and case law on non-competition agreements between employers and employees and the agreement should not exceed lawful boundaries.
  7. Assistance and Cooperation: Address the employee’s commitment to providing reasonable assistance and cooperation regarding the transition, return of company property, or any ongoing matters.
  8. Health Insurance and Benefits: Specify how long the employee may continue receiving benefits, such as health insurance, and whether the employer will contribute to any portion of these costs.
  9. Governing Law and Jurisdiction: Indicate the applicable governing law and jurisdiction for any legal disputes or claims arising from the severance agreement.
  10. Acknowledgement: Include a section where both parties acknowledge that they have read and understood the terms of the agreement, and that it represents the entire agreement between them, superseding any prior agreements or understandings. We recommend specific language and disclosures clearly approves the right of an employee to seek independent counsel and advice before signing the agreement.

Keep in mind that labor laws and employment regulations vary by jurisdiction, so it is important to consult with a legal professional to ensure that the severance agreement complies with all applicable laws and regulations.

A proper evaluation of the circumstances surrounding an employee’s termination or separation may reveal that it is more appropriate to pursue settlement discussions instead of defending potential litigation.

Whether as an employer or as an employee you need assistance with a severance agreement, our firm is here for you. Contact Fredrick P. Niemann, Esq. at, or call him today at (855) 376-5291.


Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Employment Law Attorney