How non-disparagement agreements work after dismissal

News of several tech layoffs has dominated the headlines for weeks. About 18,000 people in the Amazon and 12,000 of Google’s parent company Alphabet. About 10,000 of Microsoft. An approximately half of the 7,5000 workers on Twitter. And social media feeds are filled with juicy details about severance packages, including information on the legal documents employees must sign before getting their pay.

This has left some questioning the legitimacy of those documents. But experts say these non-disparagement agreements are pretty basic.

Severance packages can be a godsend for employees affected by layoffs, giving workers some financial cushion as they begin their job search. Most Americans are “at-will” employees, meaning that severance is not always necessary, although some are States require payments to certain types of workers. But while companies can choose to be generous with packages—Twitter and Salesforcefor example, is providing up to three and five months of salary and benefitseach one usually has some strings attached.

Prospective former employees are usually asked to sign some sort of separation agreement that includes a non-disparagement clause, as well as a liability release. “To receive severance, you must sign an agreement. Companies want to sign them so employees don’t sue them,” said Amy Spurling, CEO and co-founder of Compt, which offers employee perk stipend software for HR departments.

Spurling, who has been in the HR industry for more than two decades and is very familiar with the layoff process, said luck that in order for employees to sign such an agreement, companies must offer compensation. That’s why it’s always tied to severance—it’s standard operating procedure.

“A nondisparagement is a fundamental clause. I’ve never seen a release agreement that doesn’t include it,” Spurling said.

How non-disparagement agreements work

While this paperwork is standard, it still pays to understand how the process works. Employers typically discuss the terms of any agreements at the same time they meet with a worker to discuss layoffs, said Texas-based plaintiff attorney Omar Ochoa. Employers usually want the employee to sign the agreement before paying any severance pay but it is not necessary before a layoff is effective.

Non-disparagement agreements are not the same as non-disclosure agreements (NDA). Actually not being sarcastic usually ensures that you don’t write or say anything negative about the company. Now if you know about systemic discrimination going on at the company or something illegal, that’s usually not in a non-disparagement agreement. This is not a gag order.

“You still have recourse as an employee,” Spurling said. An NDA is very strict – you have to pretend nothing happened, he added. Many times in cases of alleged sexual harassment, for example, an employee may be required to sign an NDA as part of a settlement agreement, after which they are prohibited from talking about any allegations.

But Spurling says nondisparagement works both ways. He recommends that if it is not in the agreement, the affected employees should ask their employer for similar terms. “I think that’s a reasonable question on the employee’s side. If I don’t say bad things about the company, they don’t have to say bad things about me either,” Spurling said.

Employees should also look carefully through any severance agreements for any type of non-compete clause that may limit their ability to continue working in a specific role or industry. “That’s a huge red flag,” Spurling said. “Any severance money they offer you probably won’t be enough to start a new career, so make sure the non-compete doesn’t prevent you from continuing your career with another company.”

In addition to checking the agreement for non-compete language, Spurling recommends also checking for any new non-solicitation clauses. This usually prevents you from generally hiring or trying to hire your former colleagues. If it is in agreement, it is something worth trying to negotiate.

“It is very important that an employee understands all the provisions of any agreement,” Ochoa said luck. “Reading the agreement in its entirety is the minimum.” And be sure to ask if you don’t understand anything, even if it’s a specific word or phrase that might be confusing.

Better to ask now than regret later because these agreements are legally enforceable. “Employees who sign agreements must assume that the employer is willing to enforce them,” Ochoa said. In many cases, monitoring employee compliance and settling any violations may not be financially feasible, so the agreement may be a scare tactic, or deterrence, in the hope that the employee will comply.

But if the violation is serious, or if the amount of money issued is large, the company may take steps to enforce an agreement. It is usually more common among executives and higher management levels than the average rank-and-file worker though.

For the average worker, hiring a lawyer to review the agreement may not be necessary—and it may not be possible due to the financial and time constraints faced by workers involved in a layoff.

“The bottom line is, if you’re let go and you’re not in a management position… just sign the paper and take the money,” Spurling said.

If you have a dispute and a good reason to sue the company, then it may be worth talking to an employment lawyer before signing anything. But Spurling adds that the reason has to be good — it can’t just be because you’re angry that you’re being let go.

“Not signing the paperwork to ‘put it in the company’ means you’re underpaid. If there aren’t any red flags, sign on the dotted line and get the money,” he recommends.

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