Severance Packages & The Red Flags They May Be Hiding


(Last Updated On: January 9, 2023)

Writing on documents

There are some sneaky red flags that might be lurking in your severance agreement. Here’s what you should know about severance packages and the warning signs our Massachusetts employment lawyers often encounter that indicate the offered agreement may put you at risk.     

What is a Severance Package?

A severance package, or severance agreement, states what an employer will offer in terms of payment and benefits when you leave the company due to being laid off or having your employment terminated. From a MA Employment Law standpoint, this agreement protects the employer from lawsuits from their ex-employee.    

3 Things to Know About Severance Packages as an MA Employee 

Before you sign a severance agreement with a Massachusetts employer you’ll be leaving, it’s important to keep three things in mind. First, realize that a severance package is typically written by the employer, so the terms and clauses it includes will likely favor the employer rather than the employee. Next, you’re giving up some legal rights when you execute the agreement. And last, be aware that the severance agreement will create new obligations for both you and your employer.  

4 Severance Package Red Flags to Look Out For

So, what exactly might be hiding in your severance agreement? Here are four red flags to be aware of before signing.  

1. Claw Back 
This is the ability for your company to take back the money it is agreeing to pay you if you breach the agreement.  Some severance agreements allow the company to declare, without a court order, that you have breached the severance agreement. Then they either stop paying you what was agreed or demand it back (possibly in court).  

2. Liquidated Damages 

Next, be aware of a liquidated damages clause. If your company declares that you have breached the terms of the agreement, or a court determines that you have, this clause provides for a penalty to be levied against you. So, if a clause says each breach is $10k, you could be on the hook for $10k per breach.  

3. Attorney Fees 
Some agreements call for the employee to be responsible for the company’s attorney fees if there is a dispute arising out of the agreement. While some clauses “fee shift,” meaning that the prevailing party is awarded the attorney’s fees, the phrase “prevailing party” is not always defined. Thus, further litigation could follow.  

4. Alternative Dispute Resolution 

This phrase refers to mediation or arbitration. Check to see if either of these are included in your agreement. While mediation can be a great way to resolve a dispute arising out of the agreement, arbitration is not always beneficial to the employee. It is expensive, and you give up the right to present your case in front a jury. 

Need Help with a Severance Agreement in Massachusetts? 

Spotted any of these red flags hiding in plain sight in your severance agreement? We’re here to help! Even if you didn’t notice any immediate warning signs, having an employment attorney review your severance package to understand its nuances and everything you’re agreeing to before you sign is always a good idea.  Contact Rodman Employment Law at 617-820-5250 to ensure that your rights are protected at every point of your exit plan.  

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