Ending a job relationship can be a difficult decision for any Rhode Island employer. When a worker leaves, the goal is to protect the company. At the same time, a good plan provides a clear path forward for the person leaving. A strong severance agreement can lower the risk for businesses and make it easier for both sides to move forward with less fear of future court cases.
Drafting enforceable releases
Employers often use severance agreements during staff reductions or when a senior leader moves on. They are effective tools for defining a mutual, final end to the working relationship.
To be enforceable, a severance agreement must be carefully drafted and comply with applicable state and federal law. Further, the employer will generally need to offer additional consideration. This means providing a benefit the worker is not already owed, such as an extra month of pay or extended health coverage. A thorough severance package addresses several specific areas to provide maximum protection:
- Release of many state and federal legal claims
- A clear deadline for the employee to consider the agreement (and any legally required time periods, if applicable)
- Details on final wage payments and vacation time, which should align with Rhode Island wage laws and the employer’s written policies
- Return of company property and digital files
These elements work together to create boundaries, preventing a standard exit from becoming a costly legal battle.
Adapting to new federal rules
It’s also important for employers to stay abreast of developing rules for severance agreements. For instance, recent NLRB guidance has increased scrutiny of broad confidentiality and non-disparagement clauses in severance agreements for many non-supervisory employees. Employers should review templates to ensure they tailor these provisions appropriately.
We will continue to follow developments, but Rhode Island employers would be wise to ensure they use current forms when drafting agreements. Older forms may not comply with current guidance.
Letting employees go can be what’s best for a business, but it is crucial that employers approach the process with caution. By properly drafting and enforcing severance agreements, employers can avoid being held back by past disputes. Taking the time to plan a professional exit provides the peace of mind needed to lead a business with confidence.
