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No Rehire and No Comment Clauses in Severance Agreements

By Paul Snitzer

Proffering a severance agreement to employees being let go in a reduction in force (RIF), or for other reasons not involving willful misconduct, is now a common practice in corporate America. The basic structure of the severance agreement is an offer from the employer to the departing employee of the payment of monies to which the employee is not already entitled, in exchange for a release of claim and promise not to sue by the departing employee. If done properly ' meaning that they are signed “knowingly and voluntarily” by the former employee ' the severance agreement constitutes a binding contract that precludes the former employee from suing over a released claim.

While the basic structure described above is fairly simple, it is also now common for employers to “load-up” the severance agreements with numerous types of other clauses, beyond a simple release and covenant not to sue. Often, these additional clauses are included by rote, without giving thought as to their consequence. Recent decisions indicate that courts are willing to hold both employees and employers to all of the terms of their agreements.

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