Why Do Employers Ask Employees to Sign Severance Agreements?

Businessman putting files in briefcase

With tough economic times upon us, I have been meeting with more and more employees and executives who have been asked to sign severance agreements. I am often asked, why is my employer so adamant that I sign such an agreement? Is it because I have a strong potential lawsuit against them? Are they required to do so under Maryland law? Are they just being nice to me?

It’s never easy to answer that question, but one thing is for sure — there is no legal requirement, under Maryland law or federal law, that an employer provides an employee with a severance agreement. In fact, many employers provide severance agreements because they want to buy peace with the employee and not have to worry about a potential discrimination charge or lawsuit in the future. That does not mean that the employee actually has a valid legal action — it just means that the employer does not want to have to worry about any such lawsuit in the future.

Finally, some employers provide severance agreements because they want to maintain a strong reputation in the community and among their employees for treating their employees with respect, even when they fire employees. To that extent, some employers do want to do the right thing, and some employers do genuinely care about their employees and want to soften the blow from an unexpected termination.

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