Massachusetts Executive Separation Agreements
Your employer has offered you a severance agreement. You may focus on the amount of money on the table, but there is more to consider before you sign. The agreement may affect your benefits, bonus, equity and ability to pursue legal claims. It may also limit where you can work or who you can contact after leaving the company. A severance agreement is a binding contract, often prepared by corporate counsel to protect the employer’s interests first. These agreements can affect a professional’s income, benefits, reputation, future employment and legal rights long after a job ends.
Krasnoo, Klehm & Falkner LLP has extensive experience handling severance and executive separation agreements in Massachusetts, as well as employment and business disputes. With a long history in Andover, the Merrimack Valley and across Massachusetts, the firm represents executives and other professionals who are negotiating the terms of their departure from an employer. With 100 combined years of legal knowledge, the firm brings a strong background in employment disputes and civil litigation to separation-package negotiations.
Know What Your Employer Owes You
Severance pay is different from wages your employer already owes you. If your employer ends your job, Massachusetts law requires it to pay your earned wages and unused vacation time when you leave.
Before reviewing the severance offer, find out which payments you have already earned and which benefits your employer offers in exchange for signing. Late payment of wages can expose an employer to treble damages, meaning you may be entitled to three times the amount owed.
Why A Severance Agreement Needs Careful Legal Review
A severance agreement usually asks an employee to accept compensation in exchange for giving up certain rights. Before signing, a professional should understand exactly what the agreement requires and what it may prevent them from doing later. A severance agreement lawyer Massachusetts professionals work with can review these terms before the deadline passes.
Protecting Compensation, Benefits And Career Mobility
Severance terms are not always final just because an employer presents them in writing. The proposed severance amount may not show the full value of the package. Depending on your situation, an attorney may be able to negotiate for:
- Payment Terms & Schedules: A lump sum payment, continued salary, a better payment schedule, or stronger financial terms.
- Health Benefits: Possible employer-paid coverage or health benefit extensions after your employment ends.
- Bonuses & Commissions: Pro-rated bonuses, commissions and other pay you have earned.
- Equity: Unvested stock options and possible early vesting of awards.
- Tax Considerations: How you structure payments to manage their tax impact.
- Departure Communications & Reputation: A neutral reference, agreed language for a company announcement, mutual nondisparagement terms, and clear language that reduces future risk to protect a professional’s standing after separation.
Consider What You May Be Giving Up & Restrictive Clauses
A separation agreement may limit your future work, what you can say or your right to bring legal claims. Restrictive clauses deserve close review. A broad noncompete or nonsolicitation clause may limit a professional’s ability to work in the same industry, serve clients or accept a new opportunity. For executives and wealth managers, these restrictions can affect short-term income and long-term career growth.
It may include, subject to the Massachusetts Noncompetition Agreement Act:
- Noncompete Restrictions: Limits on where you can work. If your agreement includes a noncompete, Massachusetts law may require your employer to provide garden leave during the restricted period.
- Nonsolicitation Terms: Limits on contacting clients, customers or employees.
- Confidentiality Obligations: Limits on what you can share.
- Nondisparagement Language: Limits on what you can say about your former employer.
Understanding The General Release Of Claims
Many severance agreements require the employee to release legal claims against the employer. A waiver of claims may involve:
- Age discrimination
- Gender discrimination
- Unpaid wages
- Retaliation
- Whistleblower issues
- Breach of your employment agreement
- Other employment-related disputes
An experienced employment litigator can determine whether potential claims may create leverage in negotiations.
Statutory Protections for Older Workers
If you are 40 or older, federal law also protects you when a separation agreement asks you to waive age discrimination claims. Older workers should be more careful, as agreements involving age-discrimination waivers may include specific review and revocation periods provided under the Age Discrimination in Employment Act (ADEA) and the Older Workers Benefit Protection Act (OWBPA).
Protect Your Interests Before Signing
A separation agreement can affect much more than the dollar amount you will receive. An experienced lawyer at Krasnoo, Klehm & Falkner LLP can review the agreement, explain what you may give up and point out terms you may want to negotiate.
Krasnoo, Klehm & Falkner LLP applies 100 combined years of legal knowledge to help clients understand their rights, evaluate risk and pursue stronger separation terms in Massachusetts. Call us at 978-475-9955 or contact us online to schedule a consultation.
Frequently Asked Questions About Executive Severance Agreements
Here are answers to some common questions. Understanding these issues can help you make a more informed decision before signing.
Q: How much time do I have to review an executive severance agreement in Massachusetts?
A: Federal law gives employees aged 40 and older at least 21 days to review a severance package (or 45 days in a group layoff/RIF) and a mandatory seven-day post-signing revocation period if age discrimination claims are waived under the OWBPA. Even if you are under 40, executive agreements typically allow a reasonable review window, and an experienced attorney can request an extension to conduct a full review and negotiate terms.
Q: Can my employer withhold my final paycheck if I refuse to sign a severance agreement?
A: No. Under the Massachusetts Wage Act (M.G.L. c. 149, § 148), an employer is legally required to pay all earned wages and accrued, unused vacation time on the day you are involuntarily terminated. Final pay cannot be made contingent on signing a severance agreement or liability waiver, and delaying final payment exposes the employer to automatic triple (treble) damages and mandatory attorney’s fees.
Q: How does the Massachusetts Noncompetition Agreement Act affect severance negotiations?
A: Under current state law, noncompete agreements signed after October 1, 2018, generally require “garden leave” pay – meaning the employer must pay at least 50% of your highest annualized base salary during the post-employment restricted period – or other mutually agreed-upon consideration. If your severance agreement attempts to impose or enforce a noncompete without meeting these statutory requirements, an attorney can leverage that defect to invalidate the restriction or negotiate increased separation compensation.