Severance provisions in an employment agreement can be an easy way for both the employer and the employee to obtain the severance package that they desire should the employment relationship end while the parties are on good terms with each other. In addition to the amount of the severance payment (or a formula upon which the severance payment will be calculated), the severance agreement should state whether the benefits shall be paid in a lump sum or in installments.  If the payments are to be made in installments, the agreement should also contain a defined schedule of payments so that each party understands when each payment is due.  An employee should also avoid consenting to permitting the employer to deduct from his paycheck or bank account any amount equaling a negative vacation balance or an overpayment of expenses. Both parties should also ensure that the employment agreement’s severance provisions contain a statement of whether the employee shall be paid for accrued vacation.  Indeed, payment for accrued vacation may be considered earned compensation under state law unless otherwise stated in the parties’ severance agreement.  Importantly, the parties should also ensure that the severance provisions of their employment agreement address how the severance payments will be taxed, if at all. Next, should the employee hold any stock or other interest in the employer, the parties should also be sure to address how the rights of the employee-stockholder will be affected by the employee’s departure.  The parties should examine the employee’s stock options and determine how to dispose of both the employee’s vested and non-vested options.  Employees should also ensure that there is no immediate loss of their stock grants or vested options and that they have adequate time in which to exercise their options. Further, because severance plans are governed by ERISA, the severance provisions should also include all formalities of an ERISA plan.  It should comply with all of the ERISA disclosure and notice provisions, it should include a continuing obligation of the employer and an ongoing administrative framework for administering the plan, and it should include an immediate payment of monies due as wages under wage payment law. The parties should also be sure to negotiate what an employer may disclose about an employee’s employment after the parties’ relationship has ended.  Both parties should avoid language that permits the employer to provide information that reflects the employee’s work to any potential employers.  Such references could reflect poorly upon the employee and later subject the employer to claims of defamation.  Instead, the parties should negotiate a neutral reference that confirms the employee’s employment, position, employment status, dates of employment, and salary. Finally, the parties should be sure to clearly define when the severance provisions will apply.  Neither an employer nor an employee wants to be in a situation where the parties’ agreement ends, and so facially, it appears that the employee is entitled to severance provisions, but the employee is staying with the company, either in their same capacity or in a different capacity.  Accordingly, the parties should clearly state whether the severance provisions are only applicable if the contract ends and the employee leaves the company or if the contract ends and the employee remains employed with the company.