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As the authoritative force in Employment Law, it only seemed right to introduce one of the many upcoming series in which we introduce a variety of topics that looks to educate and deliver in a manner that only Miletti Law® can. To that end, this blog is Part XVII of our ongoing series on “Life Sciences Industry Guide for Labor and Employment,” in which we review the basics and issues of concern to employers engaged within the life sciences industry. In Part XVI of the series and our blog titled “Separation of Employment in the Life Sciences Industry,” we hammered on some issues of concern to employers when separating from employees. Regarding these issues, we mentioned that due to the exponential growth of corporate transactions, acquisitions, and mergers within the life sciences industry, employers must be proactively involved in understanding the best strategies and techniques for approaching the numerous challenges accompanying the separation of employees and their employers, whether through resignation or termination. As a way of engaging in severance negotiations and/or avoiding breaching contract claims, an employer should assess whether the employee is at-will since this can have a substantial impact on the ability of the employer to go ahead with employee separation through termination.
As a continuation of this discussion, this blog is titled “Severance Agreements, Policies, & Plans in Life Sciences Industry” and is an overview of the available severance agreements, policies, and plans in the life sciences industry.
Severance Agreements, Policies, & Plans in Life Sciences Industry
Employers within the life sciences industry should consider maintaining severance agreements, policies, or plans that would elicit benefits in the event of severance between employees and their businesses or organizations. Such agreements, policies, or plans should propose and define potential benefits that would be entitled to employees who undergo termination without “cause.” Elsewhere, employers might be able to use such a variety of agreements, policies, or plans as a way of limiting severance to particular kinds of separation (e.g., job elimination). Nonetheless, irrespective of the approach an employer decides to use, every severance agreement, policy, or plan should:
- Specify the plan administrator and clarify that the administrator has the authority to interpret the agreement, policy, or plan and that its decision is binding and final
- Contain a non-assignment clause to prevent the assignment of benefits
- Require that before receiving any benefits, every employee should sign a release of claims
- State that, irrespective of the reasons, severance would not be given to an employee who quits
- Exclude reassignments with an affiliate and within the company
- Exclude terminations in association with any transaction, such as an asset sale, following the reception of a job offer by the employer from the buyer.
Importantly, while they must be consistent with the specific benefits agreement, policy, or plan documents, the amount of benefits elicited varies from employer to employer by payment. Most of the time, the “level” of the employee, such as regular service and service time, and severance, are tied. Aimed to offer substantially more generous benefits that include, but are not limited to, equity awards, most businesses offer different and separate plans to various levels of employees (e.g., executive employees and C-suite).
In Part XVII of this series and our blog titled “Concerns Life Sciences Industry Employers have over ERISA & Taxes,” we shall move the discussion forward by hammering on the concerns employers within the life sciences industry have over ERISA (Employee Retirement Income Security Act of 1974) and taxes.
In the meantime, stay tuned for more legal guidance, training, and education. In the interim, if there are any questions or comments, please let us know at the Contact Us page!
Always rising above the bar,
Legal Writer & Author.