Jump to Navigation

The role of severance pay in an employment contract

When a company in Houston, Texas is offering an executive compensation package, severance is one aspect that is often included. It is not required, and according to the Texas Workforce Commission, severance pay is only enforceable when it is part of a written wage agreement. Earned wages, vacation time and sick leave do not count as severance pay because they are part of what the employee has already earned.

A severance package is often added to the executive compensation contract so that the prospective employee will feel more comfortable signing a noncompete agreement. The employee promises not to use or share company trade secrets for a pre-determined amount of time after leaving, and in return the business continues to provide a salary and benefits so the person does not suffer hardship while seeking employment that does not violate the noncompete.

Another function of a severance package is to prevent the employee from litigation based on perceived discrimination. The U.S. Equal Employment Opportunity Commission states that employees may be required to sign a waiver that will protect the company from retaliatory lawsuits. Severance pay acts as a settlement of the company’s liability and a statement that there were no laws, statutes, regulations or policies violated in the termination of the employee.

Rather than naming a dollar amount, a severance package typically states how many months of salary the former employee will receive and which benefits will continue. Employees may receive legal counsel that encourages them to attempt to negotiate for a more generous settlement than has been included in the agreement. Employment law does not prevent employees from negotiating for compensation, even if severance pay was not included in the employment contracts. 

No Comments

Leave a comment
Comment Information
HOW CAN
WE HELP YOU?
CONTACT US
fill out our 1-step form ›

Let Us Help You -
Contact Our Firm Today:

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Office Location

The Jackson Law Firm
3900 Essex Lane Suite 1116
Houston, Tx 77027

Local 713.574.5181
Toll Free 877.475.3058
Fax 713.527.8850
Houston Law Office Map

Review Us
FindLaw Network Subscribe to this blog's feed ►