Employees Should Have an Attorney Review Separation Agreements

Unfortunately, COVID-pandemic restrictions have forced many employers to make tough business and economic decisions, including terminating many employees. Such employees may, for the first time, be offered a Separation Agreement (or sometimes called a Severance Agreement).

Who is entitled to a Separation Agreement?

The general rule is that, unless there is a written contract allowing termination for cause or for other specified reasons, workers are “at will employees.” This means that their employment can be terminated—either by them or by their employers—for any reason or no reason. (There are some limited exceptions to that rule, such as termination based on retaliation for the employee exercising certain protected rights, or discrimination against the employee based on certain protected classifications such as race, religion, sexual orientation, gender, age, or national origin. But that is the topic for another day.)

Employees are always entitled to be paid any accrued but unused vacation time, even if they are not offered a formal Separation Agreement. But unless the employer has in place an applicable separation plan, terminated at-will employees in Illinois will generally have no legal right to separation pay or benefits. That said, many employers offer Separation Agreements even though they are not required to in order to secure a release of potential claims from employees and avoid the unnecessary cost and headache of potential litigation.

Do you need to have an attorney review your Separation Agreement?

An employer’s formal offer of a separation agreement can be complex and, if signed, will generally be legally binding. It often contains very important personal and legal terms, including the terminated employee’s release of potential claims against the employer. Because of this, we strongly suggest that the agreement be reviewed by an attorney before the employee signs it. In fact, the Illinois Workplace Transparency Act, which went into effect on January 1, 2020, requires that any Separation Agreement include an employee’s written acknowledgement of the employee’s right to have an attorney or other representative review the agreement and advise the employee about its meaning before signing it.

No matter how things have ended at work, getting a separation agreement and signing a release comes with heavy emotions and some potential confusion, and may even seem insulting. But being full of bluster and hyperbole will earn no favors. There is significant value in bringing a Separation Agreement to an attorney as soon as possible, especially one with experience in dealing with them, such as myself and the other attorneys at L&W. Separation Agreements can be difficult to understand, but we can lay out in plain English what are the key terms of the agreement and what negotiations may be possible.

In general, when negotiating a Separation Agreement you should first determine whether there are any viable legal claims you could assert against your employer. For example, is there some evidence that you were treated differently by your employer because of your membership in a protected class? As noted above, a Separation Agreement will almost certainly include a waiver and release whereby you will forego any of these claims once the agreement is signed. In other words, if you were subject to prohibited discrimination, you will be giving up your right to sue your employer. It is therefore very important to have an attorney help you understand what rights you may have and what you are giving up by signing the agreement.

What is covered in a Separation Agreement?

Separation agreements cover a lot of ground, but improvements are possible. Key terms often fall into these categories:

  • Separation Pay
  • Health Benefits
  • Equity Holdings (vested /unvested)
  • Bonus
  • Confidentiality
  • Non-competition
  • Non-solicitation of Customers and Employees
  • Mutual Non-disparagement
  • Unemployment Benefits
  • Letters of Reference
  • Outplacement

Also, having an experienced lawyer to explain the proposed terms can be invaluable. Illinois courts, the Workplace Transparency Act, and other statutes provide for some very specific rules regarding Separation Agreements. These include limits and rules regarding non-compete and non-solicitation; confidentiality; unlawful employment practice claims after agreement is signed; employee’s right to a 21-day review of agreement; and employee’s right to revoke the agreement within seven days of signing.

Are you able to request more money as part of your Separation Agreement?

Many attorneys who review Separation Agreements, are just looking to see if the contents meet such basic legal requirements. However, I also work to maximize your monetary recovery, as well as protect your interests and rights.

Just because an employer offers a certain amount of separation pay, that does not mean that the amount and terms are etched in stone, with the employer unilaterally deciding how much you are to receive. Depending on the circumstances, I normally consider such an initially-delivered separation agreement to merely be an initial offer by the employer—to which a counteroffer can be made with respect to any of its terms. That is, some employers offer a lower amount than what they are willing to pay as severance specifically because they know that many employees ask for additional amounts as part of the separation process. There is some risk that a counter-offer could be considered a rejection of the original offer, and that the employer could take all amounts off the table. But that is unlikely, and most employers simply reject the counter and reaffirm the original offer.

If you choose to make a counter, you should be prepared to elaborate on your hard work and take advantage of any unique efforts and goodwill that you established as a result. Doing so in some instances can encourage employers to give you a larger separation package than you may have otherwise been entitled to. Asking does not always result in a larger payment—but in some cases it does, and having an attorney help you navigate the process may help you improve your chances.

Negotiating generally yields success only when those alterations have proper support. Negotiation might seem like a troubling, intimidating process. But with a legal professional by your side, it could be very manageable, and the potential benefits could be significant.

Having negotiated, drafted, and reviewed hundreds of separation agreements over the years from both the employer’s and employee’s perspective, I am able to see things from both perspectives, thus helping me know how approach things to get the best result for employees, monetarily and otherwise. In some instances, I have also obtained severance payments for employees even where the employer has not initially offered any.

Contact me today to discuss how I can help you understand and negotiate the terms of your Separation Agreement. And be sure to read our Disclaimer.

Gerry Cassioppi

As an attorney and CPA, Gerry Cassioppi has had an extensive business law practice with law firms and as in-house General Counsel during his 30-year professional career in Chicago and the Chicago-area. Gerry has held leadership positions and provided legal counsel to a wide range of businesses, including Fortune 100 Companies and privately-held businesses, regarding a variety of corporate governance, transactional, executive, and employment matters.
Gerry Cassioppi
Gerry Cassioppi
Gerry Cassioppi
As an attorney and CPA, Gerry Cassioppi has had an extensive business law practice with law firms and as in-house General Counsel during his 30-year professional career in Chicago and the Chicago-area. Gerry has held leadership positions and provided legal counsel to a wide range of businesses, including Fortune 100 Companies and privately-held businesses, regarding a variety of corporate governance, transactional, executive, and employment matters.