Employment Separation Agreement

Employment Separation

An employment separation agreement can also be referred to as separation and release agreement or an employment termination agreement that is defined as:

An employment separation arrangement is a formal document that outlines the terms of an employee’s departure from their position.

An employment separation agreement typically includes a waiver of charges by the split employee against the business in return for the employer paying the employee a token, commonly referred to as severance pay, Separation pay, or termination payment.

Purpose of a Separation Agreement

The employment separation agreement often specifies the main terms of an employee’s departure from an organization. The agreement’s primary purpose is to shield both the employer and the employee from liability. It is a symbol that both sides have reached an amicable conclusion to their working arrangement, thus excludes litigations against either the employer or the employee. This agreement also helps with keeping classified business details secure.

Employer’s liability

These are employee’s claims against the employer, such as injury and other inconveniences during employment not covered by workers’ compensation. Employers are often legally charged for their negligence and their employees, who are their agents. Employers’ liability insurance usually is an employers’ liability to help avail money that could be used for these claims. Some of the employers’ liabilities include;

Discrimination

It is the unfair treatment of staff because of who they are. Discrimination is often based on race, disability, ethnicity, gender identity, sexuality, sex (including pregnancy, gender identity, and sexual orientation), national origin, age, or genetic material.

Harassment of employees

Harassment takes many forms and occurs in a variety of circumstances. People face harassment at work due to in the workplace due to their religion, sex, gender identity, age, etc. Harassed persons can either be the victims or anyone else offended by the conduct.

Accidents at work

Accidents at work are the most common form of employers’ liability. The accidents include injuries and health emergencies that an employee might encounter.

Worker’s compensation

The employer will be liable for employee compensation when an inconvenience such as illegal contract termination arises.

Employee’s liabilities

Employee liability is the claims of the employer against the employee. Employees are responsible to their bosses to perform their duties with due caution to prevent accidents and injuries. They are also expected to coexist with other colleagues and fail to make them liable. Employee’s liability include;

  • Negligence of responsibilities that the employer has allocated them.
  • Harassment of co-workers based on their gender, religion, sex, etc.
  • Solicitation of important company information that is held in confidentiality.
  • Non-Compete & Non-Disclosure: The Employee is expected to keep secret the information of their employer and, in some cases, not allowed to work with close competitors of the company for a stipulated period.

Basic Terms of Separation Agreement

The employer and employee agree to terminate a contract of employment according to the terms of the arrangement. It is crucial to be sure that the employer proposes the correct words and conditions.

Separation agreement specifications

The separation arrangement must be enforceable and held up in court because it is a legally binding contract. As a result, the paper should be well-planned and worded, ideally by a company solicitor or other competent legal professional. The agreement states that the employee is leaving. It should entail information such as the reasons for employee departure (e.g., resignation, layoff, termination, etc.), the termination date, and the period within which an employee worked in the company; it should make the terms and conditions of the employee’s waiver of claims very clear.

Severance package

A severance plan is a collection of pay and benefits offered by an employer to an employee following their unintentional separation from the company. It is the employer’s consideration of upholding the employment separation arrangement. Although this is optional for the employers to give or not give, as the U.S law only requires companies/managers to provide such employees with wages left due till the final working day. Some of the most well-known companies do not offer their employees severance package.

Therefore, in such a case, the employees should be required to refer to their employment contract as well as the company handbook to check whether or not they are entitled to this privilege. Apart from that, a severance payment may or may not provide cash compensation, but it must make sense in the light of the request.

The severance package may include additional fees, stock plans, and health/dental. Employers are advised to give ex-employees two weeks’ severance upon employment terminations. Offering an attractive severance package to employees is a good way for employers to bargain with them within the confines of the separation agreement. Company policies on termination should clearly state the eligibility of the severance package.

Amount of severance package

Severance packages also specify the financial arrangements that enable an employee’s termination, so the provision authorizing them must be precisely worded so that it can hold up in court if a disagreement occurs. The actual amount to be charged can be specified, and it may be paid in one lump sum or over time. The payment, as well as the payment time, must be carefully considered. If the payout is to be made in installments, the payment schedule should be deliberately designed to prevent causing the employee any inconvenience.

Tax and insurance

The severance package clause of the separation agreement should include tax exemptions and reimbursement policies. A legal practitioner should prepare these terms to ensure strength and enforceability. Employers should consider how health, disability, retirement care, and life benefits will be retained or paid before an employee can find another position, or even for a set amount of time after an employee is terminated.

Non-compete clauses

Employers impose non-compete clauses to prevent an employee from working in a similar position with a direct rival or starting a similar business for a fixed period after leaving their current employer. The provision can contain, among other items, the justification for the arrangement, the effective date and length of the agreement, the parties’ names and addresses, reimbursement or “consideration” for signing the contract, and the parties’ signatures.

This clause safeguards the company’s interests and aid in protecting the company’s precious intellectual property. It protects against ex-employees exploiting sensitive information. It is among the clauses of a separation agreement that require to be written by a legal practitioner since it can lead to dire consequences supposes a company’s information leaks.

Confidentiality

A non-disclosure clause ensures that the terms and conditions of the separation arrangement remain confidential. In addition to not disclosing or publishing the details without the employer’s permission, the employee agrees not to duplicate, alter, or use the information in any manner the employer has not allowed. The employer should explicitly specify what records should be kept private, including financial information, corporate and trade secrets, technical details, inventions, and so on.

Non-disparagement clause

Non- disparagement clause is a provision that guarantees that after a split, an employee does not openly harm the company’s or employer’s good name. The employee is prohibited from insulting, defaming, or disparaging the corporation under the terms of the arrangement.

This ban applies to all, from the public, the board of trustees, rivals, and customers, for the employee. The employee should keep the terms of the separation private. The employer should explicitly state times in the arrangement that would shield the firm from an employee who might talk publicly about the company, including the legal consequences.

Neutral reference clause

A neutral reference clause ensures that a previous employer who has been asked to give a reference can only provide and validate particular facts about an employee, such as employment dates and positions. The employer does not offer any details about the employee’s employment or departure from work. 

Other clauses

Other clauses included in the employment separation agreement include;

  • A post-employment partnership that involves professional relationships with employees even after they leave a company
  • Returning company goods such as cellphones, uniforms, identity cards, keys, laptops, etc. Failure to repay may result in penalties such as deductions from paycheck or denial of the severance package.
  • Rehiring policy for those that are eligible (those that who resign with due notice and in good standing). The employer should ensure that those seeking to be rehired normal job application process and hiring.
  • References pre-written, pre-signed, and presented to the employee help them transition to other employments.

Withdrawal of claims

The employer waives all claims against the employee, which allows the employee to seek employment elsewhere. The employee can get a neutral reference.

Avoid suing

The employer promises not to sue or make any charges against the employee. This action helps protect against disparagement, non-compete, and non-disclosure, promoting harmony and fellowship.

Letter of reference

The separation arrangement often includes a pre-written, pre-signed constructive letter of recommendation, which is done by the employer and is used by the employee to acquire another job.

Revocation periods

The revocation period is the period immediately after the date on which a Participant signs a separation agreement. As stated in the agreement, he has the right to cancel the deal.

According to Age Discrimination in Employment Act 29 CFR 1625.22, employers should provide their employees with a revocation period upon termination of an agreement. Upon revocation, which is often seven days for those under the age of forty, while it is usually twenty-one days for those over forty, the separation agreement is terminated. An employee must refund any compensation made as part of the agreement if they revoke the deal.

Considerable Employment Discrimination Laws

Federal and state rules make up the majority of employment discrimination legislation. The United States Constitution and certain state constitutions include extra protection when the employer is a national body, or the government has taken substantial measures to encourage the employer’s discrimination practice. All these laws are set up to ensure that every citizen is protected against discrimination.

Employment discrimination – Federal laws

These laws prohibit employers from discriminating against candidates or workers based on ethnicity, color, religion, sex, or national origin. Everyone is entitled to equal employment opportunities. The US Equal Employment Opportunity Commission (EEOC) enforces federal legislation barring discrimination in the hiring, termination, promotions, recruitment, pay, and benefits of career applicants and employees in several work circumstances. The laws are listed in the link below.

Employment discrimination – State laws

Harassment in the workplace is protected by state laws as well. These prohibit harassment in the workplace. Many state laws are equivalent to civil rights laws in essence, although they can include additional provisions against employment-related discrimination.

AL – § 25-1-3MT – § 49-2-303
AK – AS 18.80.210 & AS 18.80.220NE – § 48-1105
AZ – ARS 41-1463NV – NRS 613.330
AR – § 16-123-107NH – § 354-A:7
CA – GOV Code 12940 – 12952NJ – § 10:5-12
CO – § 24-34-402NM – § 28-1-7
CT – Sec. 46a-60NY – § 296
DE – Discrimination in Employment ActNC – § 143-422.2
FL – § 760.10ND – § 14-02.4-03
GA – § 45-19-29OH – § 4112.02
HI – §378-2OK – § 25-1302
ID – § 67-5909(1)OR – § 659A.030
IL – 775 ILCS 5/2-102PA – Section 5. Unlawful Discriminatory Practices
IN – IC 22-9-1: Civil Rights EnforcementRI – § 28-5-7
IA – § 216.6SC – § 1-13-80 (1)(A)
KS – § 44-1009SD – § 20-13-10
KY – § 344.040TN – § 4-21-401
LA – § 23:332TX – § 21.051
ME – § 4572UT – § 34A-5-106
MD – § 20-606VT – 21 V.S.A. § 495
MA – Mass. General Laws c.151B § 4VA – § 2.2-3903 (b)
MI – § 37.2202WA – RCW 49.60.030
MN – § 363A.08WV – § 5-11-9
MS – No Fair Employment LawWI – § 111.321
MO – § 213.055WY – § 27-9-105

Writing Employee Separation Agreement

Whether an employee is quitting for a common purpose or the business is reorganizing and releasing a group of workers, there is a need to have an employment separation agreement to defend you and your organization’s rights.

The following steps are followed when drafting a separation agreement:

Mention effective date and parties

Begin the employee separation arrangement by listing the days from which the agreement will take effect and the names of both the contractor and the employee, and the company’s name. The positions of the two parties, as well as their relationship, should be mentioned. It’s also crucial to write down the parties’ addresses.

Employer/employee relationship

A report on the dates that decide when the job arrangement under review is active and expires should be included. It should consist of the employee’s last calendar date of employment. The segment should also include the employee’s most recent payroll.

Obligations of employee & employer

Based on the company’s policies, the employer may or may not be financially liable to the employee upon loss of work. If severance necessary, the payment package may be in the form of single or multiple payments. At this point, the employee’s return of property should be emphasized. If a Non-Compete Agreement is required, the employer should state so. If an employee is expected to refrain from competing, there may be specific terms in place, such as the employee’s position not permitted to compete.

Resolving disputes

Whether or not the Employer/Employee arrangement may be compromised, there must be a mechanism for the employee to resolve any comments made by the employer that are harmful and incorrect. There is a need for the separation agreement to be written by a legal expert as it may need to be used when litigation matters arise.

Check the recorded agreement terms

The finished documentation should be adequately carefully by both parties. It is the employer’s task to ensure that every information provided is accurate and that all the responsibilities expected of the parties have been well captured. Suppose there is missing information, it should be charged as additional terms and conditions.

Signature on a document

The employment separation agreement should be signed off by both parties after they have both carefully read through the document and approved of it

Employment Separation Agreement Templates

Here are customizable employment separation agreement templates that can be modified as per the user’s need.

Employee Separation Agreement Template 01

Employee Separation Agreement Template 02

Employee Separation Agreement Template 03

Employee Separation Agreement Template 04

    Steps to Terminate an Employee

    As an employer, it is critical to ensure a seamless termination process following the steps outlined below:

    • Schedule a meeting- Determine the employee’s wrongdoing and schedule a time and place to fix the issue in a one-on-one address. However, it is essential that once the complaints are raised, the employee is given ample time to reform before issuing termination.
    • Choose an appropriate date for their last day- It should not be on a Friday or the day before a holiday weekend to give the person time to look for work elsewhere.
    • Make a separation agreement request- The Employee and employer should both sign a separation agreement that specifies that none of the parties involved is responsible for any misconduct and that the employee’s firing was purely due to their conduct.
    • Volunteer to help with the transition- After termination is complete, the employer should assist the employee in transitioning to a life of their choice by issuing reference or psychological support.

    Tips to Avoid Employee Discrimination

    Every employee is entitled to a working environment that is fair and conducive. Stern measures should be taken to ensure no discrimination in the workplace, and they include;

    • Enforcing and incorporating a stringent policy in your workplace prohibits any form of job discrimination.
    • Training staff workers on how to enforce the anti-discrimination program to understand that they will be responsible for mitigation.
    • A detailed description of how an employee allegation will be treated, including the offenders’ disciplinary action, should be included in the policy.
    • Top management must be well-versed in the company’s policies to spot job conditions that could lead to employment discrimination, intimidation, or revenge.
    • To avoid escalation, actions against harassment and reactions to employee complaints should be taken as soon as possible. The acts can also be done in a private and policy-compliant way.

    Frequently Asked Questions

    What do I need to know before signing a separation agreement?

    Before you sign any separation agreement, it is essential that you; understand all your rights, the reason for termination, analyze your severance agreement, understand all terms and conditions, whether the contract covers in detail all the present and future actions

    What are the five kinds of employee separation?

    Employee separation occurs for various reasons, which may include; Retirement, Resignation, Layoff, Retrenchment, and Dismissal

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