Employment law article by Lamb McErlane attorney Lauren M. Law, Esquire

Losing a job or implementing a workforce reduction can be one of the most challenging events in your employment relationship. Whether you are an employee who was laid off or an employer navigating a reduction in force (“RIF”), the separation process often involves significant legal considerations. At Lamb McErlane, our employment attorneys represent both employees and employers throughout Pennsylvania in matters involving severance agreements, layoffs, restrictive covenants, and employment disputes. We help clients understand their rights, evaluate risks, and negotiate practical solutions during periods of workplace transition.

What Is a Severance Agreement and Why Does It Matter?

When an employee is laid off, terminated, or included in a reduction in force, employers frequently present a severance agreement in exchange for compensation beyond what the employee is otherwise entitled to receive. While many individuals are tempted to sign immediately, severance agreements often contain important legal provisions that can affect future employment opportunities, potential legal claims, and ongoing obligations to a former employer. Likewise, employers should carefully draft severance agreements to ensure that they are enforceable, compliant with applicable law, and tailored to the circumstances of the separation.

Should You Negotiate Your Severance Package?

A severance agreement is more than simply a promise to provide severance pay. In many cases, the agreement contains a release of legal claims, confidentiality obligations, non-disparagement provisions, cooperation requirements, restrictive covenants, and other terms that may continue long after the employment relationship ends. Once signed, these provisions can have significant consequences for both parties.

For employees, one of the most important questions is whether the severance package is fair. Many employees assume that severance agreements are non-negotiable. In reality, employers are often willing to negotiate certain terms, particularly when the employee held a management, executive, sales, or professional position. Severance pay, health insurance contributions, reference provisions, restrictive covenant language, bonus payments, equity rights, and other terms may all be subject to negotiation depending on the circumstances.

Are You Giving Up Valuable Legal Rights?

Employees should also carefully evaluate whether they may have potential legal claims before signing a release. A severance agreement may require an employee to waive claims involving discrimination, retaliation, wage and hour issues, contract disputes, or other employment-related matters. Once a valid release is signed, pursuing those claims later may be difficult or impossible. Having an attorney review the agreement before signing can help employees understand what rights they may be giving up and whether additional compensation should be requested.

Employers: Reductions in Force Can Create Unexpected Legal Risks

Employers face their own set of challenges when implementing layoffs or reductions in force. Workforce reductions can create legal exposure if the selection process disproportionately impacts protected groups or if the employer fails to follow contractual obligations, policies, or applicable laws. Employers should carefully document the business reasons supporting a reduction in force and ensure that decisions are based on legitimate, non-discriminatory factors.

Additional considerations arise when employees who are forty years of age or older are included in a reduction in force. Federal law may require specific disclosures and review periods when an employer seeks the release of age discrimination claims in connection with certain group terminations. Failure to comply with these requirements can jeopardize the enforceability of the release and create unnecessary legal risk.

Understanding Non-Competes, Non-Solicitation Agreements, and Restrictive Covenants

Restrictive covenants are another area that frequently generates disputes during employee separations. Many severance agreements contain provisions addressing non-competition obligations, non-solicitation restrictions, confidentiality requirements, and the return of company property. Employees should understand exactly what restrictions apply to their future employment opportunities before signing an agreement. A non-compete clause that appears straightforward may significantly limit a person’s ability to work within a particular industry or geographic area.

Employers should ensure that restrictive covenants are narrowly tailored and supported by legitimate business interests. Overly broad restrictions may be difficult to enforce and can increase the likelihood of litigation. Carefully drafted restrictive covenant provisions can help protect customer relationships, confidential information, trade secrets, and other valuable business assets while reducing the risk of future disputes.

Save Money and Avoid Litigation with Lawyer Review

Because severance agreements often involve a combination of employment law, contract law, and restrictive covenant issues, both employers and employees benefit from obtaining legal guidance before making important decisions. A proactive review of the agreement can identify potential concerns, clarify obligations, and help avoid costly misunderstandings later.

*This alert is for educational purposes only and is not intended to be legal advice.

 Questions About Pennsylvania Employment Law?

Whether you are an employee evaluating a severance package or an employer preparing for a layoff, reduction in force, or employee separation, experienced legal counsel can provide valuable guidance. At Lamb McErlane, we represent both employees and employers throughout Pennsylvania in employment law matters involving severance agreements, restrictive covenants, workplace investigations, discrimination claims, and workforce reductions. If you have questions about a separation agreement or employment-related dispute, contact our office today to schedule a consultation and discuss how we may be able to help protect your interests. If you have any questions or if we may be of further assistance regarding workplace matters, please contact Lauren M. Law.

Lauren M. Law is a Senior Associate at Lamb McErlane. She focuses her practice on complex civil and business litigation, labor and employment law, and personal injury. Lauren can be reached by email at llaw@lambmcerlane.com or by phone at 267-388-2886.

Lauren is a dedicated trial attorney with over a decade of experience in civil litigation. She exhibits proficiency across employment counseling, including policy development, conducting internal investigations for workplace discrimination, harassment, wrongful termination, retaliation, wage and hour disputes, whistleblower claims, as well as the negotiation of employment contracts, non-compete agreements, and severance packages.