Severance Agreement

Not everyone is able to leave their job on good terms. If you’re leaving your job, you may be asked to sign a severance agreement. Whether you are fired, laid off, or let go due to downsizing, being let go from a job isn’t a pleasant experience. The employment attorneys at McDonald & Kloth, LLC will gladly review your severance agreement to ensure you aren’t forgoing adequate compensation or giving up legal rights without your knowledge. Moreover, the attorneys at McDonald & Kloth, LLC have been very successful in negotiating enhanced value in severance agreements presented by the company.

What is a Severance Agreement?

A severance agreement is an employment contract that specifies the terms of your employment in the event of job termination. This agreement documents the rights and responsibilities between an employer and employee. Under this contract, any severance package of pay and benefits are specified along with the conditions that must be met.

A severance agreement commonly includes:

  • A non-compete clause that forbids the former employee from working for a competitor within a certain amount of time.
  • An agreement not to file a wrongful termination lawsuit.
  • The amount of any severance pay.
  • Any extended benefits and the amount of time they will be available.

What to Look for in a Severance Agreement

In addition to wages, a severance package may include health insurance for a certain period of time or pro-rated bonuses. Furthermore, there may be a continuation of other employee benefits coverage. A company with a formal severance pay policy will include the following elements in the agreement:

  • The purpose of the severance plan.
  • Conditions for paying severance.
  • Workers covered by the policy.
  • How severance pay is calculated and paid.
  • Employer’s rights to modify an agreement.

Is Severance Pay Required by Law?

There is no requirement in the Fair Labor Standards Act (FLSA) for severance pay. Therefore, employers in Wisconsin are not required to offer severance packages to employees. However, if an employer chooses to provide severance benefits, it must comply with the terms in a previous agreement to receive it. For example, there could be a severance pay clause in your pre-employment contract giving you the right to severance pay.

How is Severance Pay Calculated?

In general, severance pay is based on the length of employment. A typical formula for severance pay might be one week of the employee’s regular rate of pay multiplied by the number of years worked. This pay is given as either a lump sum or paid over a number of weeks. However, severance pay is calculated differently between companies.

How Can a Lawyer Help?

Employees should be given a reasonable amount of time to review a severance agreement before signing it. While taking the time to read over the contract, consult with an attorney. If you are terminated, you may want to negotiate a reasonable severance package, especially if you have an existing employment agreement. The experienced employment & labor attorneys at McDonald & Kloth, LLC can identify legal options available and help you negotiate a better agreement if the offer isn’t sufficient.

Looking for an attorney in the Milwaukee area? For more information on how McDonald & Kloth, LLC can help you, please contact us at (414) 395-8774 or