Ending A Working Relationship With Integrity

Severance agreements trigger important issues, not just for employees, but for employers as well. Surprisingly, despite these significant issues, employers and employees both neglect to consult legal counsel with respect to these severance agreements until it is too late. The employment law attorneys at The Litigation Boutique LLC, regularly address these issues in their practice. They understand how these issues affect employers and employees. Our firm’s lawyers draft and review severance agreements with a clear objective eye and a penchant for creative solutions, whether those situations require negotiation or litigation.

Consult Us Before Signing Anything

In advance of signing any severance agreement, we commonly advise clients to never sign one without consulting with us first. Many of these severance agreements contain waiver clauses. These waiver clauses state that once you have signed the agreement, you waive all further right to have the agreement reviewed and revised by your own attorney and that you forego the right to bring any legal claims you may have had against your employer.

Key Elements Of A Severance Agreement In Colorado

A severance agreement is a complex, binding contract that exchanges compensation for legal finality. In Colorado, these agreements generally rely on the following components:

• Severance pay: The specific amount and payment schedule of your severance pay
• Release of claims: Losing your right to sue for discrimination, wrongful termination or other workplace issues
• Confidentiality and nondisparagement: Clauses that prevent parties from discussing the settlement terms or speaking negatively about one another to third parties
• Restrictive covenants: Noncompete and nonsolicitation clauses, which must strictly adhere to Colorado’s specific income thresholds and notice requirements
• References: Directives on how the company will handle future employment verifications
• COBRA and benefits: Details regarding the continuation of health insurance, life insurance and when coverage officially terminates
• Tax indemnification: Clarity on how funds are taxed to avoid surprise liabilities

Properly structuring these elements protects the employer from future litigation while ensuring the employee receives the full financial value of the package.

What To Watch Out For When Signing Severance Agreements

While your severance agreement may look routine, boilerplate language often hides significant long-term risks. Whether you are an employer drafting the document or an executive reviewing one, it is critical to identify clauses that could be problematic, such as:

• Broad releases: Ensure the waiver does not accidentally release vested rights (like 401k balances) or claims that cannot be waived by law.
• Overly broad NDAs: Confidentiality clauses cannot prevent an employee from speaking about alleged unfair labor practices or reporting illegal acts to government agencies.
• Liquidated damages: Penalties for breaching the agreement must be reasonable.
• Clawbacks: Provisions allowing a company to reclaim money should have clear, fair triggers, rather than vague “misconduct” labels.

You should also remember that most initial offers are negotiable. We frequently assist clients in adjusting payment timing to minimize tax liabilities, securing agreed-upon neutral reference language or obtaining outplacement services. Other valuable leverage points include negotiating employer subsidies for COBRA premiums, and ensuring favorable treatment for unvested stock options or pro-rated annual bonuses.

Drafting A Sustainable Agreement

Employers, too, should consult with us prior to offering any severance agreement to their employees, even if the employers have drafted their own severance agreements. We can provide a legal opinion to the employer regarding the advisability and enforceability of the agreement. Furthermore, any employer who knows that an employee has violated a severance agreement should consult with us in order to anticipate and manage any costly legal exposure or to litigate the matter against the breaching employee.

Contact A Denver Severance Negotiation Attorney

For a completely discreet and confidential discussion with a lawyer from our firm, please call us at 303-578-2833. You can also contact our Colorado law firm online to schedule your initial appointment.