The “Money Terms” in a Typical Severance Agreement

/ 10/06/2012

Dallas employment lawyer Keith Clouse drafts and negotiates severance agreements and separation packages for senior executives and other high-level employees. Here, he discusses the “money terms” found in many severance agreements.


1. Severance payment: This is the dollar value the employee receives upon departure. A severance payment could be paid in a single lump sum or according to the employer’s salary schedule. Payments may start immediately or they may be delayed for several months. In some cases, the amount is set according to the terms of an existing employment agreement. In other cases, the parties must negotiate this figure upon the executive’s departure.


2. Money the employer already owes the employee: The employer should pay the employee for unused vacation time or unreimbursed expenses if such amounts are owed.


3. Bonuses: A bonus provision in a severance agreement may take several forms. For example, the parties may agree to prorate the employee’s expected bonus. Or, the employee might agree to forfeit any bonus payments. Often, bonus payments are paid at the same time these payments would have been paid had the employee remained with the company.


4. Benefits: A company may continue to provide the terminated employee with health and welfare benefits during the severance period.


5. Equity awards: Equity awards may be handled in different ways. Depending on the parties’ agreement, the terminated employee may immediately vest in certain stock options, continue to vest during the severance period, or forfeit any equity awards.


To speak to Mr. Clouse or to another Dallas employment law attorney at Clouse Dunn LLP, send an email to [email protected] or call (214) 239-2705.

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