Severance Negotiation

At the end of an employment relationship, employers may offer to pay an employee a severance in exchange for a general release of claims.  This is the primary exchange, although separation agreements typically contain several other clauses including confidentiality provisions, non-disparagement agreements, restrictive covenants, representations regarding taxation, and the like.  A severance package can be very helpful to a newly-separated employee, who may require several weeks or months to search for suitable re-employment.

Sometimes, employees simply want an attorney to review the terms of the agreement to check for any red flags and answer questions about the terms.  Other times, employees are interested in negotiating the terms of the agreement – including asking for a higher severance pay, adjusting the non-monetary terms, or adding provisions that the employer did not originally propose.  Very often, even if an employer does not provide a severance offer at the time that the employment relationship comes to an end, it is possible to leverage the circumstances of the employment and separation in order to reach a prompt and amicable resolution.  Negotiation is typically much faster and more cost-effective than litigating a case right away.

Our employment lawyers negotiate the terms of separation agreements on a daily basis.  We are happy to discuss your options and answer any questions you may have.

Employment Contract Law

Employment in Illinois is considered “at-will,” which generally means that either the employer or the employee may terminate the employment relationship at any time, for any reason or no reason at all, as long as is the employer’s action is not prohibited by law. The state and federal laws prohibiting the termination of an employment relationship include laws prohibiting discrimination based on the employee’s membership in a protected class, or prohibiting retaliation for the employee’s engagement in protected activity. In addition, the employer may not terminate an employee if doing so is in violation of an employment contract.
Under some circumstances, employers and employees will form a contract governing the employment relationship, including wages, hours, benefits, job duties, termination requirements, duration of employment, confidentiality agreements, severance packages, and non-compete agreements. Once a valid contract is formed, it is legally binding upon both parties and can be enforced in court.
Our employment lawyers in Chicago are equipped to handle your case with care.
Common Restrictions
Employees should also beware of restrictive language in employment contracts. Restrictive language in employment agreements can often be confusing; non-competition clauses, restrictions on the use of confidential information, and non-solicitation clauses may seem quite similar. This article explains the various types of restrictive covenants. In general, the four types of restrictive covenants are:

  • Restrictions on the use of confidential information
  • Anti-raiding of employees
  • Non-solicitation of customers
  • Non-compete agreements/provisions

For each type of restrictive covenant, an employer may be able to seek action against an employee if the covenant is breached. If an employee has a restriction in his/her employment agreement, the employer may be able to bring an action against the employee for breach of contract if he/she does not adhere to the restriction. Likewise, the employer may have a remedy against the employee under a state statute (such as the Illinois Trade Secrets Act) or a common law claim for breach of fiduciary duty or misappropriation of trade secrets, even if the employee never signed an employment agreement.
Restrictions on Use of Confidential Information
For the employee, this is the least onerous of the four types of restrictive covenants. These restrictions prohibit a former employee from “using” or “misappropriating” confidential information that the employee learned or to which the employee had access while employed.
Anti-Raiding of Employees
These provisions prohibit former employees from inducing other employees to leave the former employer or to form a competing business. The duration of the restriction may vary but must be “reasonable” in order to be enforceable.
Non-Solicitation of Customers
Non-solicitation provisions prohibit former employees from inducing customers to stop doing business with the employee’s former employer and/or from going into business with the former employee. Such provisions typically prohibit contact with and solicitation of customers with whom the employee has dealt within the last six months (or a similar period of time) of the employee’s employment. Like anti-raiding provisions, the duration of the restriction may vary but must be “reasonable” in order to be enforceable.
Non-Compete Agreements/Provisions
Non-compete agreements or provisions are the most onerous of the restrictive covenants for employees, because they may diminish the ability of a former employee to earn a living. These provisions prohibit former employees from engaging in a “competing business” with the former employer. How broadly or narrowly the term “competing business” is defined is essential, but the term generally means that the employee may not work for a competitor for a certain period of time. In order to be enforceable, non-compete provisions must be reasonable in scope, duration, and geographic limitations. The more specialized the former employer’s business, the more extensive a non-compete provision can be under the law.

FAQs About Severance Negotiation

Am I entitled to severance pay upon termination of employment?

There is no federal or Illinois state law mandating that employers pay employees severance pay upon termination. However, severance policies are a common feature of employer-provided benefit packages. There are a variety of reasons why employers offer severance to laid-off employees, but one common reason is it is a way of avoiding litigation since severance benefits can be offered in exchange for a terminated employee’s release of claims against the employer.

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