Have you learned that you are likely to be terminated from your current position and thus expecting a severance package? It is important to learn more about severance agreements in Texas and to understand what a severance agreement is and how it can affect you.

What is a Severance Agreement Under Texas Law?

What is a severance agreement under Texas law? According to Section 207.049 of the Texas Unemployment Compensation Act, “severance pay” is defined as “dismissal or separation income paid on termination of the employment in addition to the employee’s usual earnings from the employer at the time of termination.”

According to a fact sheet from the Texas Workforce Commission, some types of severance agreements can affect an employee’s benefit eligibility in the event of termination, including, for instance “severance pay that is unilaterally offered.”

However, when an employee negotiates a severance agreement, the final negotiated severance package typically does not impact benefit eligibility.

When it comes to common law, the fact sheet clarifies that “courts have generally defined severance pay to be a payment the employer has obligated itself to make, either verbally or in writing, which is based upon a set formula, such as length of prior service.”

Negotiating Severance Agreements

While the Texas Payday Law makes clear that an employer does not owe an employee severance pay unless such a severance package has been promised through a written agreement, when the employee is offered a severance package, she is permitted to try to negotiate it.
In many instances, negotiating a severance agreement can help the employee to obtain substantially better terms that can help during your period of unemployment or as you transition to your next position.

If you are terminated from your job in Texas, it is important to understand that you are not required to take a severance agreement if one is offered to you.

Understanding the Terms of a Severance Agreement and How They May Impact You

Severance agreements often have many different terms within them, and when you are dealing with the stress of being terminated from your current job, it can be difficult to think about how these terms can impact you in the future. What kinds of terms should you know about that may appear in a severance agreement?

  • Release of claims: sometimes severance agreements will have language about the “release of claims,” or the “release of all claims.” Agreeing to such a term can be devastating for an employee who may have a discrimination claim (or another lawsuit) to file against the employer. For instance, if you were the victim of sex discrimination at work, which resulted in your employer refusing to give you a promotion, you may be eligible to file a discrimination lawsuit. However, if you agree to a release of claims in your severance agreement, you will lose your right to sue.
  • Noncompete agreements: this clause is sometimes known as a covenant not to compete, and it can limit an employee’s ability to work after her employment period with the current employer ends. How can such a clause limit employment possibilities? For instance, a noncompete agreement can require the employee to avoid working for a competitor for a period of time after employment ends, or can require an employee to avoid taking clients from the current employer.
  • Confidentiality agreements: in a severance agreement, an employer can require you to maintain confidentiality surrounding workplace matters, which can also limit your ability to file a lawsuit or, in some cases, to obtain meaningful employment in the short term.

While some (or all) of these clauses may turn out to be unenforceable depending upon the specific circumstances, it is best to avoid agreeing to anything when you do not understand the implications. You should reach out to an experienced Texas employment law attorney who can answer your questions.

Severance Agreements for Employees Over 40: The Older Workers Benefit Protection Act

Are you over 40 years old?

The Older Workers Benefit Protection Act (OWBPA) and the Age Discrimination in Employment Act (ADEA) provide extra protections for employees over the age of 40. Those protections require employers to tailor their severance agreements for employees over 40 accordingly.

Rules for Employees Over 40

Most importantly, the OWBPA requires that employers abide by a timeline to obtain a legitimate release of any age discrimination claims. For an individual employee, the timeline is 21 days. This means that an employee aged 40 or older has 21 days to consider the release of any age discrimination claims before signing a severance agreement.

If you have concerns, you should always speak with an employment discrimination attorney in Texas.

21-Day & 7-Day Revocation Periods

Employees have 21 days to consider an agreement. After the 21 day period is over the severance agreement is considered null and void.

Texas law allows for a seven-day revocation period. This means that, if you sign a severance agreement, you have seven days from the date on which you signed it to revoke. In other words, you can change your mind as long as you do it within seven days.

Contact an Employment Law Attorney in Texas

If you have questions or concerns about a severance agreement, you should discuss your options with an experienced employment law attorney in Texas. An advocate at our firm can speak with you today. Contact Wood Edwards LLP for additional information.