Can an Employee Cancel a Severance Package Already Signed?
Generally, no. In most cases, an employee will not be able to undo a signed severance offer to negotiate a better deal. But there are cases where that may be possible. However, every case is different and will depend on the particular facts of each situation.
In those rare cases, there may be specific legal reasons which, if proven, may be enough to allow an employee to undo a severance package already signed. Generally, the courts will consider the following questions to determine whether it should set aside a severance agreement signed by an employee:
- Is the language in the severance agreement clear and specific? If the terms are overly complex, or vague and ambiguous, it may give a court reason to void a severance agreement.
- Was the employee a “sophisticated person”? The courts will consider the employee’s education and experience when determining if the employee understood what they were being asked to sign. The chances of being able to set aside a severance agreement decrease as the employee’s level of sophistication rises.
- Did the employee object to the terms of the severance agreement and the duress/pressure to sign?
- Did the employee have enough time to review the contents and terms of the severance agreement, or to obtain legal advice? It is usually best practice to give an employee at least one (1) week to consider and reflect on what they are being asked to sign. This way, the employee will have a harder time arguing she lacked the capacity to understand the bargain.
- Did the employee have an alternative option to signing the severance agreement?
- Did the employee take steps to avoid the severance agreement after signing it?
- Did negotiations occur? Negotiating terms of a severance agreement raises a presumption that the employee understood and agreed to what they signed.
- Was the employer’s conduct appropriate? Courts will scrutinize whether an employer created pressure, duress, coercion, compulsion or any other undue influence by requiring the employee to sign the severance agreement immediately, or withholding minimum employment standards until the severance agreement is signed.
- Was the bargain “unconscionable”? Was the employee under an inequality of bargaining power, or was the deal substantially unfair? In either case, the courts may be more willing to set aside the signed severance agreement.
If you are asked to sign a severance package which you do not feel is fair, it is important that you speak to an employment lawyer. Although the courts are able to find a severance agreement already signed to be invalid, they do so in very rare cases. It is always prudent to speak with an employment lawyer before signing a severance agreement.
To save yourself legal costs you should ensure that releases your employees sign are not done under duress. It is often best to get legal advice regarding the best way to proceed in order to have the release be valid.
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