The majority of people employed in Ohio don’t have an individual employment contract. Because of this, they are employed “at-will,” which means that generally either an employer or employee can terminate the employment at any time.
These days, few people work for the same company their entire adult lives. Whether the company terminates or lays off employees, workers come and go. In some instances, if the employer terminates employment, they may wish to offer a severance agreement.
Employers are not legally required to offer severance packages to their employees, and there is, therefore, no standard that an employer must follow if they choose to do so. Usually, an employer includes a severance package because they want to impose particular conditions upon the employee even after they no longer work for them and will offer financial rewards in exchange.
Some of the typical provisions in severance agreements are:
Waiver of the right to sue. This means any employee who agrees to the terms of the severance package is unable to sue the company for terminating their employment regardless of whether they have breached the contract or even in instances where harassment, discrimination, or whistleblower retaliation are the reasons behind the termination.
Confidentiality agreements. Severance contracts are usually confidential, and therefore the employee is not permitted to disclose the terms or amount offered with anyone except their spouse, financial or tax advisor, or their attorney.
Non-disparagement. A severance contract might be put in place to ensure that an employee doesn’t bad-mouth the business or their employer after their contract has been terminated. This protects the business’s reputation.
Non-compete clauses. An employee whose contract has come to an end may wish to work for another similar business. A non-compete clause in a severance agreement offers financial compensation to that employee providing they promise not to work for a competitor for a set period. This protects the employer, for example, from the employee stealing their clients or using their knowledge and experience to profit another company.
No-rehire provision. Sometimes an employer may also wish to include this clause in the severance agreement to ensure that the employer will not try to work for the company at any point in the future, and that if they apply for a position they can be summarily rejected.
Limitations on severance agreements
When drafting a severance agreement, it is essential for employers to be aware of their limitations. For example, an employer cannot request that the employee give up their right to vested pension benefits. Similarly, an employer cannot ask an employee to waive their right to file a Charge of Discrimination with the U.S. Equal Employment Opportunity Commission or the Ohio Civil Rights Commission, though they can request that the employee waive the right to receive financial benefit from doing so.
There are also certain restrictions applicable to employees over 40 if an employer requests to waive potential age discrimination claims in the severance agreement. If they do wish to include this clause, the employer must incorporate several written protections for the employee in the severance agreement as per the federal Older Workers Benefit Protection Act (“OWBPA”).
How are severance agreements upheld?
In Ohio, severance agreements are not governed by any specific law, so it is up to employers and employees to negotiate the terms and agree to them. If you have been offered severance, contact the experienced business attorneys at DeWitt Law at 614.398.2886 for a free consultation to see if your employer is giving you a fair deal, or if the terms of the proposed agreement are not legally enforceable.