Severance Agreements

The end of an employment relationship, particularly at the executive level, is one of the most financially and professionally critical moments in a career. A severance agreement, also known as an exit or separation agreement, is the legal document that governs this departure. It is a common misconception that severance is a gift or a standard, non-negotiable entitlement. In reality, a severance offer is the opening bid in a complex negotiation. The company’s primary objective is to secure a broad release of all potential legal claims from the departing executive at the lowest possible cost. The executive’s objective is to secure the maximum financial compensation, preserve their professional reputation, and ensure a smooth transition to their next opportunity. At Mailly Law, we are masters of this negotiation. We specialize in representing senior executives in these high-stakes discussions, transforming one-sided corporate documents into balanced, comprehensive agreements that protect our clients’ financial well-being and future career prospects.

The risks of signing a standard severance agreement without expert legal review are profound. You may be waiving valuable legal claims you are not even aware of, such as claims for discrimination, retaliation, or unpaid bonuses. You could be agreeing to overly broad non-compete or non-solicitation clauses that severely limit your ability to earn a living in your own industry. You might be accepting a financial package that is far below what you are truly owed or what a similarly situated executive would receive. The agreement could contain a one-sided non-disparagement clause that silences you while allowing the company to control the narrative of your departure. In essence, signing without counsel is a unilateral disarmament in a high-stakes negotiation.

Our approach to severance negotiations is strategic, assertive, and rooted in a deep understanding of corporate leverage and executive compensation. We don’t just “review” agreements; we deconstruct them and rebuild them in our client’s favor.

The Mailly Law Severance Negotiation Process:

1. Forensic Review and Leverage Analysis: We begin by conducting a thorough analysis of the circumstances of your departure. Was it a true “Without Cause” termination, or could it be construed as retaliation or discrimination? Did the company violate any terms of your employment agreement? We identify all potential legal claims, as these form the foundation of our negotiating leverage. We meticulously review your employment history, performance reviews, and compensation data.
2. Deconstructing the Initial Offer: We dissect the company’s initial offer, clause by clause. We benchmark the monetary component against industry norms and your contractual entitlements. We identify problematic language in the release of claims, confidentiality provisions, and restrictive covenants.
3. Crafting a Powerful Counter-Proposal: Armed with our analysis, we draft a comprehensive counter-proposal. Our negotiation points routinely include:

• Enhanced Severance Pay: We push for a significant increase in the cash severance, often arguing for a multiple of your base salary and target bonus, rather than just salary alone.
• Full Bonus Payout: If you are terminated late in a performance year, we argue that you have earned your pro-rata or full annual bonus and that it should be included in the package.
• Continued Health Benefits: We negotiate for the company to pay the full premium for your COBRA health insurance coverage for the duration of the severance period, a significant financial benefit.
• Favorable Equity Treatment: We negotiate for the accelerated vesting of unvested stock options and RSUs, an extension of the exercise period for vested options, and the removal of any clauses that would claw back your equity.
• Positive, Mutually Agreed-Upon Reference: We negotiate the specific language of the reference the company will provide to future potential employers, ensuring it is positive and protects your professional reputation.
• Outplacement Services: We demand high-quality, executive-level outplacement services to assist in your career transition.
• Revising Restrictive Covenants: We aggressively work to narrow the scope, duration, and geographic reach of any non-compete or non-solicitation clauses, or to have them eliminated entirely.
• Mutual Non-Disparagement: We insist that any non-disparagement clause be mutual, meaning the company and its key officers are also prohibited from speaking ill of you.

An executive departure is not an ending; it is a transition. A well-negotiated severance agreement provides the financial bridge and professional protection necessary to make that transition successful. At Mailly Law, we provide the strategic advocacy and sophisticated negotiating skills required to ensure our clients exit on their own terms, with the resources and reputation they have rightfully earned.