If you are being terminated, laid-off, downsized, or fired for performance, there is a pretty good chance your employer will offer you severance. They want to. Why?
Let us explain: when terminating employees involuntarily, companies always assume some level of risk that they will be sued for wrongful termination or other potential violations of labor laws. However, if they offer you a severance agreement, it will likely contain a carefully worded set of clauses that, when signed, release the company from all claims or damages against them, now and in the future. In other words, in exchange for acknowledging that you will never sue them, for any reason, or at any time in the future, you are getting compensation (severance and or other benefits) in return. A sample “release from claims” clause might look like this in a severance agreement:
In consideration for the obligations of the Company outlined in this agreement, Employee fully and forever releases the company from any claim, liability, obligation, or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Employee may possess arising from any omissions, acts or facts that have occurred up until and including the date Employee has signed this Agreement including, without limitation: (subsequent sections of this clause list specific types of claims that employee might conceivably make against the Company at some point in the future).
While this tangle of words may seem innocuous, it is part of a legally binding document, and once you sign it, you significantly limit your ability to EVER pursue a legal claim against your company. You can still sue them in the future, but if you sign a severance agreement and release from all claims, it is unlikely that you case will go very far, unless you were coerced or threatened with some form of serious retaliation. Think of a release-from-claims agreement as the “period” that your employer puts at the end of the sentence about your time at the company. It’s over, done, and now on to the next paragraph.
Obviously, not everyone who is terminated will be offered severance. If you are terminated “for cause,” including malfeasance, gross negligence, performance, or some other serious offense, you are not likely to receive anything more from the company but a swift kick in the behind on your way out the door. In most cases like this, the company will have ironclad evidence of the offense or infraction, and thus not feel compelled to protect themselves with the cheap insurance provided by a release-from-claims and severance agreement. Also, you might find that smaller companies without fully developed severance practices do not provide severance agreements with this type of language, and may simply offer you a payout for your notice period (or no payout at all) if you are terminated.
As always, if you are not sure what your rights are, or what the language in your severance agreement really means, you should seek the assistance of an employment lawyer who represents individual employees in termination and other employment matters.