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Severance Agreement Indemnification

A company may be required to pay severance pay under the employee`s employment contract, the WARN act or its state equivalent or company policy. Although the company is not required to pay severance pay, it will often offer severance pay in exchange for various agreements of the dismissed employee, including the release of any claims against the company (see below). An executive has the best chance of negotiating severance pay if the employee has been dismissed for no “reason,” as defined in an employment contract. In another recent decision, the Tenth Circuit Court of Appeals (which includes Oklahoma, Kansas, New Mexico, Colorado, Wyoming and Utah, as well as parts of Yellowstone National Park, which extend as far as Montana and Idaho) cancelled publications signed by the plaintiffs after the employer failed to comply with the OWBPA requirements. In particular, the employer did not disclose the correct “decision unit” in the authorization agreements and did not list all the “eligibility factors” used to determine who is subject to the redundancy program. Again, the publications “did not meet the strict and unlimited requirements of the OWBPA” and therefore became legally ineffective. The following severance pay is not deferred under Section 409A, provided they are granted for a “limited period,” which generally means two to three years: (1) the continuation of health insurance during the COBRA continuation period; (2) reimbursement of operating or moving expenses; (3) minimus; (4) Reimbursement of medical expenses that are otherwise deductible under the IRS Code Section 213. Ensure that the promise not to file a complaint protects not only the employer, but also all related parties involved, including parents of companies, subsidiaries, directors, executives, agents, employees, etc. In general, the scope of the “liberated parts” should be as broad as possible – and in general, there is a standard boiler platform that covers it in any agreement. However, it is important to pause to carefully consider this problem with each use of the version, in order to confirm that the defined term is broad enough.

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April 12, 2021
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