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Severance Agreements

Severance Agreements:

A severance agreement is a contract between an employer and an employee. In most situations, the employee will be giving up his or her right to sue the employer and the employee will be provided additional compensation, benefits or other consideration for giving up this right. The employer and employee can agree on other issues as well such as covenants to not compete, confidentiality agreements and non-solicitation agreements. By signing the contract, both the employer and the employee demonstrate their intent to be bound by the terms of the agreement and resolve any disputes between them when agreeing to terminate the employment relationship.

An employee is not entitled to a severance agreement and an employer has no obligation to offer one in most cases.  When there are complicating factors in a termination, a release is worth something to the employer to resolve the matter. If the employee is in a protected class, has been out on leave such as FMLA or requested leave, filed a workers’ compensation claim or made some complaint against the company, then the employer may want to put closure to the situation with a severance agreement.

Severance agreements are an excellent way to resolve conflicts between an employer and employee when the employment relationship has deteriorated to the point that it needs to be terminated. Severance agreements can be used when there are reasons for terminating an employee other than for cause or documented poor performance, but can be used in almost any situation.

A separation agreement is a contract and an employer can’t force an employee to sign a severance agreement. To be enforceable an employee must be given a reasonable amount of time to consider the agreement and should be given an opportunity to consult with an attorney before signing the agreement. To obtain an enforceable release of age discrimination claims under the Older Workers Benefit Protection (OWBPA), a terminated employee must receive 21 days to sign and consider a release. If the termination is part of an exit incentive program or other termination offered to a group or class of employees, regardless of whether the program is voluntary or involuntary, the employee must receive 45 days to review the release. In Minnesota to release claims under the Minnesota Human Rights Act, an employee must be given a 15-day revocation period unless the release is given in settlement of a claim filed with the Department of Human Rights or another administrative agency or judicial body.

Protect your rights. Know what you’re signing before taking a severance package! If you have questions about severance agreements, please contact employment lawyer John C. Holden at Holden Law Firm. Call 952-345-8272 or email us at

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