KEY ELEMENTS OF A LEGALLY SOUND SEVERANCE AGREEMENT IN NJ
Severance agreements help employers minimize risk and maintain goodwill when ending an employment relationship. In New Jersey, these agreements must comply with both federal and state law to be enforceable and effective.
To be legally sound, a severance agreement should:
• Clearly identify the reason for separation and confirm voluntary execution.
• Offer consideration — something of value beyond what the employee is already owed (such as additional pay or benefits).
• Include a release of claims that complies with New Jersey and federal laws, including the Older Workers Benefit Protection Act for employees age 40 and above.
• Specify confidentiality, non-disparagement, and non-solicitation terms where appropriate.
• Provide time for the employee to review and, where required, revoke the agreement.
"A WELL-DRAFTED SEVERANCE AGREEMENTIS BOTH A SAFEGUARD AND A STRATEGY."
Employers should ensure that severance agreements do not conflict with recent New Jersey laws limiting non-disclosure clauses related to discrimination, retaliation, or harassment claims (N.J.S.A. 10:5-12.8). Legal review before issuing agreements is essential.
Properly designed severance agreements close employment relationships cleanly, reduce litigation risk, and protect business reputation.
