What voids a severance agreement?

What voids a severance agreement?

On Behalf of | Jun 16, 2023 | Severance Agreements

Going through a career transition after being laid off brings a lot of uncertainties. You cannot help but worry about your future after suddenly losing your job. There is a lot to think about that you might overlook a crucial step: reviewing the severance agreement. The legal jargon can be overwhelming. You might just sign it immediately. However, several circumstances can potentially invalidate a severance agreement. Carefully reviewing them can make a huge difference to your future.

Lack of legal consideration

Both parties must receive legal consideration for a severance agreement to be enforceable. On your side, as an employee, there must be something of value beyond what you are already entitled to receive based on existing employment laws. It may be void if the agreement fails to provide additional benefits or compensation for you.

Duress or coercion

Another thing that may invalidate an agreement is when someone forces you to sign it against your will. Note that coercion does not only mean a threat to harm you physically, your family or your property. It may also include any threat to humiliate or cause a scandal about you or your family, sue you in court or cause significant economic loss.

Misrepresentation or fraud

If either party engages in misrepresentation or fraud during the execution of the agreement, it may be unforeseeable. Examples of this may include providing false information or concealing material facts. Making promises that neither you nor your employer can fulfill may also invalidate the agreement.

Noncompliance with formalities

You and your employer must follow certain legal formalities for a severance agreement to be enforceable. You must ensure that the agreement is in writing and that your employer has signed it. Sometimes, you might also need a witness or have it notarized. Failing to adhere to these formalities can void the agreement.

Violation of employment laws

Severance agreements must comply with relevant employment laws such as anti-discrimination laws, wage and hour regulations and workers’ compensation provisions. An agreement containing provisions that contradict these laws may be considered invalid.

Unlawful conditions or waivers

Make sure that no provision requires you to waive your rights to file complaints against your employer for unlawful acts. If an agreement includes unlawful conditions that forbid you from taking legal action against discrimination, harassment or wage violations, it may be unenforceable.

A well-drafted and legally compliant agreement provides employers and employees a fair and equitable resolution. By understanding the potential pitfalls and taking necessary precautions, both parties can mitigate the risks of invalidating a severance agreement.