A growing trend in severance agreements – which we hate – is an “alternative employment” or “mitigation” clause. These clauses reduce the severance an employee receives if the employee gets another job while their severance is being paid out.
ALTERNATIVE EMPLOYMENT/MITIGATION IN SEVERANCE AGREEMENTS – ARE THESE ENFORCEABLE?
Probably. So long as the employee receives consideration, a severance agreement containing an alternative employment/mitigation clause is probably enforceable. In other words, so long as the employee gets something (i.e. any amount of severance), even if it is not the entire amount contemplated by the severance, the agreement stands.
ALTERNATIVE EMPLOYMENT/MITIGATION IN SEVERANCE AGREEMENTS – WHY WE HATE THEM.
These clauses are not at all employee-friendly. Alternative Employment/Mitigation clauses make the amount of severance an employee will receive uncertain and disincentivize the employee from looking for other work.
Severance agreements, at their core, are an agreed-upon exchange whereby the company receives certain promises (most notably a release from being sued), in exchange for certain consideration to the employee (most notably money). These clauses allow an employer to keep the full value of an employee’s promise not to sue, but can substantially decrease the value of the employer’s obligation to the employee.
ALTERNATIVE EMPLOYMENT/MITIGATION IN SEVERANCE AGREEMENTS – WHAT SHOULD YOU DO?
A few things. First, consider having your agreement reviewed by an employment lawyer. Second, you need to think about whether you are releasing any viable claims against your former employer (i.e., figure out if there is anything you could possibly sue your former employer for). Finally, based on a review of your agreement, and evaluation of your potential claims, you should negotiate for better severance terms.
Feel free to contact us at any time to talk about your severance agreement. We are here to help.
SAMPLE ALTERNATIVE EMPLOYMENT / MITIGATION CLAUSES IN SEVERANCE AGREEMENTS:
“Alternative Employment. Notwithstanding the anything contained herein to the contrary, if Employee becomes employed with another employer before Last Severance Payment Date, the payments and assistance as set forth herein will stop effective the date Employee begins his new employment.
“Employer shall continue to pay Employee an amount equal to their current salary through Severance End Date or the date on which Employee commences alternative employment, whichever occurs first. Payments shall be made in accordance with Employer’s ordinary payroll practices and withholdings for taxes, etc. shall be made from such payments.