Home Q&A Forum Pros & cons of employee separation agreements?
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Contracts

Employee Separation Agreement

California

Asked on Jun 27, 2023

Pros & cons of employee separation agreements?

I am a small business owner and I am considering offering an Employee Separation Agreement to an employee who is leaving the company. I want to understand the pros and cons of this type of agreement so that I can make the best decision for my business.

Answers from 1 Lawyer

Answer

Contracts

California

Answered 1028 days ago

Gagandeep K.

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Business Lawyer
Licensed in California
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5.0 (1)
Member Since:
April 25, 2023

There are several reasons for using an employee separation agreement - it can be used to protect confidential information and IP, obtain general liability waiver for certain legal claims (e.g., wrongful termination), offer an employee certain benefits and severance pay, and include additional provisions (e.g., non-disparagement clause so the employee cannot spread negative information about the company, return of company equipment, etc.). Just as an employer is not legally required to offer a severance agreement, an employee is not required by law to sign a severance agreement. However, an employee may be more likely to sign a reasonable, balanced severance agreement. You can read more about severance agreements here: https://www.contractscounsel.com/t/g/us/severance-agreement/11#toc--circumstances-for-offering-severance-

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The only way to answer your question is to have an attorney review the agreement. Not sure why it would stop you from collecting unemployment benefits, but, again, without seeing the agreement, there is no way to answer this question.

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I recently left my job after two years of employment and my former employer has asked me to sign a separation agreement. I am unsure if I am legally obligated to sign this agreement or if employee separation agreements are required by law. I am hesitant to sign the agreement until I have a better understanding of my rights and obligations.

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When an employee leaves a company, an employer can offer severance agreement/separation agreement/termination agreement, where employer offers a severance package to the employee (e.g., lump sum money, extended benefits) in exchange for limiting their liability (e.g., release of certain legal claims, confidentiality provisions). An employee can decide whether to accept the severance agreement as-is, whether to negotiate for more favorable terms or to reject the offer. You may consult an attorney to review the severance agreement to understand your rights, obligations, the benefit you are receiving, and the claims you are waiving.

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Can an employee be forced to sign a separation agreement that includes non-compete clauses?

I recently received a separation agreement from my employer, which includes non-compete clauses that restrict me from working in the same industry for a certain period of time. I am concerned about the potential impact on my career prospects and wonder if I can be legally compelled to sign such an agreement.

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Forced? No. Can they condition signature to receiving some form of severance? Yes. Can they condition it to receive a final paycheck of money earned? No. Can they include a non-compete in a separation agreement? Yes… but California has VERY employee-friendly laws related to non-competes. The specifics of the presented language in the agreement will matter and should be reviewed by competent counsel in your jurisdiction.

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It is hard to say what your rights and obligations are under that separation agreement without seeing it as all agreements and the obligations contained within them are different and could impact you in various ways.

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I would look into a good HR software package.

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