When an employee is informed of a layoff/termination and presented with a separation agreement, there are many thoughts that go through his or her mind. Most likely, the focus is on how am I going to pay the bills, provide for myself and my family, find another job, etc. These are the big picture issues. But what about the separation agreement? Why is the employer offering it? Should I sign it?
The separation agreement is a modern invention. Back in the day, when an employer terminated someone, they may (or may not) offer severance as a matter of goodwill, with no strings attached. Well those days are over.
Now, when an employer offers to pay severance, it is looking for things in return. Primarily, the employer is looking for peace and a cap to its exposure. It does this by receiving a release of claims and obtaining a covenant from the employee that no additional compensation is owed and no lawsuits will be filed against it. These promises are valuable to an employer because the defense of a lawsuit is likely to cost the employer far in excess of the amount of severance it is offering.
So what should an employee do when presented with a separation agreement? Evaluate whether you have claims against the employer. If you do, then you should evaluate whether the value of the claims is adequately compensated by the amount of severance being offered. If you think you have claims and that the severance amount offered is insufficient, it is probably time to consult with legal counsel about your options.