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An employment separation agreement, also known as a severance agreement, is a document that outlines the lawful terms of an employee's departure from a company. An employee’s departure from a company may be on several grounds. The reasons might range from unpleasant situations to anything. Understandably, these situations are never pleasant. However, to escape the unpleasantry, an employment separation agreement is required.

Details Included in an Employment Separation Agreement

The agreement includes details about:

  • The Employee’s Final Compensation: The agreement must include a segment of the employee's final compensation. This is necessary for you as it will display the compensated amount.
  • Any Non-Compete Clauses: Any non-compete clauses regarding the organization must be added. Lawful obligations, too, must be added. Thus, make sure you add in these.

Often, an employment separation agreement is used by an employer against legal arguments. However, along with protecting the firm, they can include beneficial clauses for the terminated employee too. An agreement displaying both of these features shows how well-balanced and crafted an employment separation agreement can be.

Provisions in an Employment Separation Agreement

An employment service agreement is a deal between an employer and an employee. Such a document signifies that the employee, under any circumstances, shall not disclose the private dealings in the company. This is solely done because higher cases of fraud are very high. Thus, to prevent that, certain steps and conditions are written down. These documents vary widely in what they offer. This is the reason why experienced attorneys must be summoned before drafting the agreement.

Provisions, too, mark up as being significant in an employment separation agreement. Some common provisions include:

  • Release of Liability: This is one of the most important parts of an employment separation agreement. The release of liability is made to ensure that an employee doesn’t sue the company. The reason can vary from wrongful termination to other claims arising from termination. It is to be noted that not all claims are contractually released without approval. This applies to those claims, too, which are under the Fair Labor Standards Act (FLSA).
  • Severance or Separation Pay: Severance payments are often proportional to the period of employment. It is to be noted that the terms of payment can vary. It can also be expressed as a lump sum amount of cash payment, as payments over time, or as a form of ownership interest.
  • Non-Compete and Non-Solicitation: Non-compete clauses state that a former employee shouldn't work in any competitor's firm. This can also be included in the same industry for a certain period after termination. These are enforceable in some states, including California. On the other hand, non-solicitation clauses prevent bringing in a terminated person to take customers. It can also include taking other employees from the previous firm to a different firm. However, these operate under limited circumstances.
  • Non-Disparagement and Non-Disclosure: In certain cases, employers may want employees to not say anything about their company. Thus, they turn to non-disparagement and non-disclosure agreements to make this happen. An employee signing the document ensures that he will not be sharing harmful comments about the employer under any circumstances. This agreement is also made to keep things confidential. It is to be noted that this agreement can be mutual. However, exceptions exist in these too. This can signify cooperation when an investigation ever takes place. There are exceptions to other legally mandated processes, too.

Thus, these are the provisions in an employment separation agreement. You should know that the National Labor Relations Board may impact severance agreements. Furthermore, it is a requirement to consult an attorney during the drafting of an employment separation agreement. Therefore, you should take the advice of an attorney and update yourself on recent regulations. Doing this will keep you from violating the NLRB.

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Negotiating an Employment Separation Package

Negotiating an employment separation package is a lot of work. However, if you know the key steps of how to do it, it will be easier for you. Below are the key steps for negotiating an exit package.

  • Understanding the Components of the Package: A severance package has various components. Therefore, before signing in, you must analyze each one of them. This should be done to get the most out of an employment separation package. Things like severance pay, paid time off, benefits, and stock options should be paid attention to. Furthermore, transition and outplacement services, liability release, non-disclosure agreements, and references must be added. These details must be checked thoroughly before agreeing to the employment separation package.
  • Pausing Before Signing Paperwork: An employer may want the layoff process to go as smoothly as possible. Thus, they may try to convince you to sign the package soon. Understandably, you might want the process to get a little quick. However, you must remind yourself that slow and steady wins the race. Therefore, calmly and in your best form of behavior, go through each of the clauses thoroughly. Also, ensure you do your research well and know your rights before agreeing to a severance package.
  • Understanding Where Your Priorities Lie: Know your severance package thoroughly. This will be beneficial in the long run when you have a proper idea about your professional and personal priorities. Any amount of negotiation brings in to get the desired outcome. Therefore, list the priorities that will lead you to negotiate a good deal.
  • Including Multiple Options for Negotiating: Make sure you add more than one amount of money to your package. Apart from money, pay attention to insurance, health benefits, etc. This will lead you to get more out of your severance package.
  • Adapting a Reasonable Request: You should decide to make a reasonable request while negotiating a severance package. This is to ensure that you get the amount you truly deserve. Employers usually don’t want to engage in an unreasonable, lengthy negotiation. Thus, coming to terms with a reasonable offer and complying with it is a necessity.
  • Leveraging Your Success: Make sure you let the employer know about your credits to the company. Remind the owner about your productivity and successes, thus convincing him to pay better severance. Use your successes as a key to asking for better severance pay. Make sure you demonstrate your work's high value, thus emphasizing how small your request is for a better package.
  • Standing on Your Ground: Lastly, stand your ground. If none of your requests comply then walk off without signing the document. Understand that your value is higher and make sure you settle for nothing less than what you deserve.

Note: You can also check out the employee separation agreement from here to understand more.

Key Terms for Employment Separation Agreements

  • Parties: The employer and the employee entering into the agreement.
  • Termination Date: The date of the employment in which termination becomes effective.
  • Severance Benefits: Outlines the compensation and benefits the employee will receive upon termination.
  • Release of Claims: Giving up the right to bring any claims against the company by an employee.
  • Confidentiality/Non-Disclosure: Provisions specify that the employee must maintain the confidentiality of any sensitive information even after termination.

Final Thoughts on Employment Separation Agreements

You must keep these things in mind while drafting an employment separation agreement. Keeping these things in mind will help you make a good agreement. You must remember that a good agreement takes care of both the employer and the employee. Therefore, make sure these rules are well followed and compiled thoroughly as needed.

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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.


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