An employee separation agreement is a document that outlines the terms of termination between an employer and terminated employee. By signing the agreement, the employee waives their right to sue for wrongful termination or additional severance pay. Employers can use a separation agreement with employees who are fired or laid off.
“Employee separation agreements” can have many different names. They’re also known as termination agreements; release of claims for employment; employment separation agreements; and severance agreements.
What can go in a separation agreement?
There are typically two parts to each employee separation agreement.
First, the employee waives the claims they can bring against the employer. The release of claims often includes a general waiver of any and all claims arising from the employment. Common claims often include (but are in no way limited to):
- Employment law claims;
- Compensation claims;
- Employment discrimination claims; and
- All interest, attorney fees, and costs claims.
Second, the employer pays the employee a fee in exchange for waiving those claims. This fee is different than severance pay.
An employee separation agreement can also include additional clauses that protect the business, including:
- A description of company-owned items the employee must return on or before their last day;
- The amount of severance pay, if any, the company will pay the employee;
- A non-compete clause; and
- A non-disparagement clause.
Are there laws that cover separation agreements?
What if Small Business Success Means Having 0 Employees?Hiring and Growth
Most, if not all, states have specific laws concerning each of the above pieces of an employee separation agreement. Federal law touches on some aspects of termination arrangements as well. A poorly executed separation agreement may be found unenforceable in court.
Because of the complex legal framework surrounding separation agreements, actually drafting and offering one should be done with an attorney’s guidance.