The short answer: no, you do not need an employment separation agreement. There aren’t any laws at the federal or state level requiring them. However, it’s smart to have one to protect your company from lawsuits down the road.
What legal risks does an employment separation agreement protect employers from?
Employers use separation agreements to prevent lawsuits down the road. By signing an employment separation agreement, an employee waives their rights to sue and make claims against the employer. The release of claims often includes:
- Employment law claims;
- Compensation claims;
- Employment discrimination claims; and
- All interest, attorney fees, and costs claims.
Why would an employee sign a separation agreement?
An employee typically gets money in return for signing an agreement. Do note that a separation package is entirely separate from an employee’s last paycheck, earned PTO, or wages you may owe them.
Check with your state’s local laws
Each state has laws that affect what can and cannot be put into an employment separation agreement. Click here to learn more.