Losing a job can be absolutely devastating for employees. For many, learning that they have just been terminated causes strong emotions, creates tremendous uncertainty, and leaves the employee overwhelmed with a mind racing with thoughts and questions. Thus, unsurprisingly, as those thoughts and emotions are just starting to swirl around, it is certainly not a good time for most people to abruptly make significant legal and financial decisions. And, the first decision that many employees face is truly significant: whether they should accept the terms of a severance agreement provided by their employer at the time of their termination. Nine times out of ten, the answer is “no,” at least not right then – even if the employer is pressuring the employee to immediately sign before leaving.
Of course, some terminations are necessary and some employers truly are looking to help their departing employees. Regardless of the employer’s justification for the termination or its intent, employees do themselves a favor by taking time to think through with a clear head what the employer is asking them to sign and how signing would affect them. If employees take time, maybe a few days, compose themselves and think through the situation, they will often be able to decide how to proceed on their own.
On the other hand, employees in a wide variety of situations could benefit from obtaining legal advice about how to respond to a severance offer. These situations include but are not limited to:
- Employees concerned that they have been wrongfully terminated;
- Employees who believe they are not being fairly compensated by the offered severance payment;
- Employees concerned with the scope of the claims they are being asked to release;
- Employees concerned about residual non-compete or non-solicitation obligations; and
- Employees with employer stock options or other equity grants.
For each of these situations, the proposed severance agreement itself may be confusing, may not be straightforward, or may need additional consideration. Important terms may have been omitted by intent or by chance; nonetheless, signing before considering and understanding these issues could have a long-lasting impact.
Signing a Severance Agreement in Minnesota
Minnesota does have statutory protections for employees who are pressured into prematurely signing away their legal rights against their employer, but those protections have limits. The Minnesota Human Rights Act (“MHRA”) provides a 15-day period for an employee to cancel an agreement to release legal claims against his/her employer. Minn. Stat. § 363A.31, subd. 2. Certain federal discrimination laws also have this protection.
Unfortunately, under both state and federal law, the employee’s right to rescind the release of claims only relates to the employee’s discrimination claims. Thus, if the beef between the employer and employee were based on, for example, a breach of contract, a claim of negligence, or a non-compete issue, the employee’s rescission would have no impact on the employee’s release of those claims. Given this, even with the ability to cancel the agreement with the employer, employees should only enter into such an agreement knowing what they are getting out of it and what they are getting themselves into. To make sure you are making an informed decision and appropriately weighing your options, give us a call to discuss.