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When Should I Reject a Severance Package?

Facing a layoff or employment termination can be overwhelming, often employers will offer a severance package to help with the transition. Prior to signing a severance package, you should review the agreement with an employment attorney and be aware of key clauses and their implications moving forward. The Pearson Butler team is here to help you better understand what a severance package is, the important clauses to be aware of, and when it’s right for you.

Severance Package

A severance package contains pay and benefits you are otherwise not entitled to receive as you are in the process of leaving a company. The amount of a severance package varies but often relates to the length of your employment. Employers are not required to provide severance packages, and therefore, you are under no obligation to sign a severance agreement.

Should I Accept or Reject?

The decision to accept or reject a severance package is based on your specific circumstances. Because the decision is fact-dependent, it’s important to note that you should thoroughly review the severance agreement prior to signing it. During your review, if you notice the following clauses, you should consider speaking with an employment attorney immediately prior to making the decision to accept or reject the agreement.

  • A non-compete clause within the severance agreement may prohibit you from applying to similar positions in competition with your soon-to-be former employer. You should be wary of this type of clause as it can prevent you from seeking another job in your field or in a specific geographical location. For more information on non-compete laws, we suggest reviewing this article.
  • A “gag” clause, also known as non-disparagement clause, may be implemented into your severance package. The purpose of a non-disparagement clause is to limit the potential for negative exposure from a terminated employee. Generally, if you sign a non-disparagement agreement you cannot disclose negative or harmful details surrounding your employment to a third party. This also generally prohibits from disclosing the terms of the agreement—if you break the terms you may be sued.
  • A “no rehire” clause can also be implemented to assure that you will never return to the company again. If an employee files a complaint against their employer for harassment or discrimination in the workplace, employers will often include a “no-hire” clause to ensure the complaining party is no longer allowed to work for the company.

I Rejected My Package. What’s Next?

If you choose to reject your severance package, there is no impact on you personally, as there is no legal requirement or obligation to sign a severance agreement. However, before rejecting a severance agreement, you should speak with an employment law attorney to determine if you may have a claim against your employer. If you do have a claim, your employer may be willing to negotiate the severance package to make it more appealing to you. Our employment law attorneys can explain the complexities of your case and advocate for you to achieve your best interests.

Contact our office at (800) 265-2314 or visit our Contact Us page to get started on your next consultation.