When an employee is exiting a company, either due to termination or some violations, the employer must document the terms and conditions of the termination of employment not to attract any further liability.
An employment separation agreement is a contract between the employer and employee leaving the company that encapsulates the consideration to prevent further liability. The consideration usually goes in the form of severance pay or a one-time payment.
This agreement should represent the complete and written understanding of the terms agreed on between the employer and the employee leaving the company or organization. Although an employment separation agreement is not legally binding unless signed by both parties, it is advisable to execute this type of agreement as most states have some regulations in place that elaborate on the termination of employment.
An employer uses an employment separation agreement to protect and safeguard the organization’s interests. But it is not only the company and employer whose interests are safeguarded; the employees are also eligible to have their rights protected. Therefore, both parties must read the conditions provided in the employment separation agreement and sign after that.
For example, consider yourself an employee terminated on wrongful grounds. In that case, you should carefully read all the conditions provided in the separation agreement and the rights you are giving upon.
Some of the other common reasons for employment separation are listed below:
However, no employee should be bullied or forced to sign and agree to whatever the agreement asks for. It is imperative to examine every clause associated with an employment agreement carefully. If the jargons are too complicated, the employee can seek professional legal assistance. Therefore, the employment separation agreement must cover the interest of the company and the employees so that a balance is maintained and no dispute shall arise in the future.
An employment separation agreement template covers the following details:
The separation details include the conditions associated with the date of employment, identification of the company, and the employee’s reason for separation, which can be any like termination, resignation, or retirement.
A specific clause in the agreement template states that upon signing this agreement, the employee agrees to waive their claim against the company or any associated rights. This term means that the employee, upon being terminated, cannot sue the company for whatsoever reason.
Therefore it is essential for the employee to read the terms very carefully and for the employers to frame the terms so that it does not invite any lawsuit against the company upon employment termination.
Laws suggest only including wages or any leftover vacation for the employee. But usually, employers give incentives to employees to sign the separation agreement template. In the form of incentives, they usually give some benefits like additional pay, continued health insurance policy for some time, etc.
Apart from severance benefits, employees can also receive some money upon signing the agreement.
At the commencement of your employment, you may sign a non-compete clause that mentions that you cannot be a direct competitor of your employer. This clause can also be mentioned in the separation agreement to prevent the employee from disclosing sensitive data after the employment termination.
The non-disclosure clause is crucial in any agreement, specifically a separation agreement. It avoids disputes arising from secrets revealed by the employee with outsiders violating companies’ intellectual property.
Publicly disparaging your former company is usually prohibited under the employment separation agreement template clause.
It is advisable to follow some basic guidelines for the employee’s termination. The steps are listed below:
Step 1. Define the reason
Suppose you feel that the worker has done something wrong that violates the company’s policy and questions their honesty. In that case, you must terminate the particular individual from the employment to protect the company’s interest.
Step 2. Inform the employee in person
It is always advisable to terminate the employee on good terms, which can only be possible by having a one-on-one conversation with them unless the worker is residing somewhere else.
Step 3. Decide on the last working day
It is recommended to begin the separation process during midweek to give the employee a better chance of finding another job.
Step 4. Make the separation agreement
The separation agreement can protect both parties’ interests and lead to a friendly termination. And clauses like severance and confidentiality help terminate the employment peacefully.
Step 5. Assist in settling down
Out of human courtesy, the employee can be offered assistance in settling down to his next chapter of life. The employer can provide them with a recommendation letter that can help them get the next job and settle down smoothly.
Step 1: Identify the parties
The first step is identifying the employer and employee and indicating the agreement’s date. You’ll need to fill in the following details:
Step 2: Enter the end date of employment
Next, you are expected to indicate the end date of employment and set the paid time frame. The end date of employment includes the last date when the employee will be obliged to work for the employer or company. Also, the period for which an employee works for the company must be appropriately calculated, and the employee must be provided with the payment for the same.
Step 3: Provide severance details
Further, you need to check for the severance payment in the following manner:
Step 4: Check for return of property
Next, you need to check for the return of property by the employee as follows:
Step 5: Specify the non-compete clause
The fifth step is to read and complete the non-compete clauses carefully in the agreement:
Step 6: Provide employees benefits
This is one of the vital steps in filling out the agreement. You will have to enter the profits provided in the employer-employee relationship and add the last date when the employer must provide such an advantage to their employee.
Step 7: Consider relevant laws
Lastly, you must fill in the state’s name and other relevant details concerning the governing law. It is essential to mention the state’s name within the jurisdiction of which these agreements will be valid. The name must be mentioned in Article XVI.
Step 8. Sign the agreement
Employer’s and employee’s signatures and names must be included in the agreement. The severance clause must be included in a separation agreement from the employer’s perspective. Workers that are terminated from their employment should receive a severance package. It is a package of several payments and benefits offered to the employee on their unwillingness to disassociate with the company. Employers who offer an attractive package enjoy a peaceful termination process. Yes, a revocation period is granted by an employer after the agreement is signed. The period gives the workers time to make a firm decision. The revocation period recognized by law is: Frequently, the employee refuses to sign the separation agreement, but that does not mean that the company cannot terminate their job. As discussed, a separation agreement involves the terms associated with the employment so that a peaceful termination can occur. These terms are clauses like severance pay and other profits. If the employee accepts and signs the agreement, they may be eligible to receive such gains and are not entitled to bring a lawsuit against the company. If the case is otherwise, the employee will not get the profit and will have an option to sue the company if they want to. However, it is advisable to get the agreement checked by legal counsel to be on the safe side. The employee should seek legal counsel if the terms mentioned in the agreement are difficult to understand. Clauses like non-compete, non-disclosure, non-disparagement, or similar clauses must be read very carefully.
Frequently Asked Questions
What is a severance package?
Can an employee revoke a separation agreement?
What if the employee won't sign the agreement?
How many rights will an employee be giving up upon signing the agreement?