(Last Updated On: December 20, 2023)
Navigating the complexities of severance and separation agreements in Massachusetts can be a daunting task for both employers and employees. Rodman Employment Law is here to offer insights into the legalities and best practices surrounding exit documents and provisions, so you’re well-equipped to review these agreements and determine if they are in your best interest.
The Difference Between Severance and Separation
First, it’s important to distinguish between severance and separation agreements. While these terms are often used interchangeably, each one refers to a distinct agreement that serves a specific purpose during the employee’s exit phase.
A severance agreement typically outlines financial compensation offered to an employee upon termination, often in exchange for waiving certain legal rights. On the other hand, a separation agreement is broader, encompassing not only financial aspects but also terms like confidentiality, non-disparagement, and sometimes, non-compete clauses. These agreements are pivotal in ensuring a clear, legally sound, and mutually agreeable conclusion to the employer-employee relationship, providing security and clarity for both parties.
8 Key Components of a Separation Agreements
A separation agreement typically includes elements that define the terms of an employee’s departure from a company. Here are eight common components that they can include:
1) Severance Pay
This clause provides financial support during the employee’s transition period and is often calculated based on the employee’s tenure and salary.
2) Health Coverage
This part of an exit agreement dictates the type of health coverage an employee will have after termination. Depending on the employer, a worker might be eligible for continued health insurance under COBRA for a limited time post-termination.
3) Non-Compete Clause
A provision that restricts former employees from working with competitors or starting similar businesses for a specified period and location. The enforceability of non-compete agreements varies by state.
4) Non-Disparagement Clause
This provision is often more indefinite in duration than a non-compete agreement. A non-disparagement clause prohibits employees from making negative statements about the company and its associates, regardless of the statements’ truthfulness.
5) Liability Release
The liability release prevents the employee from pursuing future legal claims against the company.
6) Unused Leave Benefits
This term refers to the company’s provision of either allowing the employee to use PTO and sick days before the termination date, or provide a monetary payout based on the amount of remaining leave time accrued by the employee.
7) Retirement Benefits
Termination agreements often detail what happens to the employee’s retirement plan, like a 401(k) or pension, after leaving the job. They cover aspects like vesting status and options for transferring these funds.
8) Employer as Reference
This clause specifies how the employer will provide job references for the departing employee. It outlines the kind of information that will be shared with future employers and who is authorized to give these references, ensuring a positive or neutral endorsement for the employee.
Severance Pay and Filing for Unemployment in MA
One common question we get from clients is whether they’re eligible for unemployment benefits if they’ve received severance pay. In Massachusetts, employees can file for unemployment benefits even with severance pay, but the rules vary. Lump sum severance usually doesn’t impact unemployment eligibility, while periodic payments might. These regulations can change, so it’s best to consult with a seasoned employment law attorney for the most timely guidance.
Support for Negotiating Separation and Severance Agreements
Rodman Employment law is able to assist both employees and employers with navigating severance and separation agreements. Contact us or schedule a quick consult to protect your interests during the termination process.
