Creating a Severance Agreement

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Creating a severance agreement is an important legal step for both employers and employees. It provides employers with a way to terminate employment in a legally compliant manner and protect against potential liability for wrongful termination, while providing employees with financial security and the assurance that their rights are respected. In this blog post, we’ll explain why it’s essential to have an experienced team on hand to help draft your agreement.

Firstly, having a severance agreement in place can provide important protection for employers against any potential legal action relating to wrongful termination. In many countries, it’s illegal to terminate someone without cause or justification. A well-drafted severance agreement can make sure that the terms of termination are clear and fair - helping employers avoid hefty fines or other punishments from regulatory authorities.

Second, having a severance agreement can provide much-needed financial security for departing employees. Depending on the arrangement agreed upon between employer and employee, there might be provision for additional compensation payments - whether as part of a lump sum settlement or as ongoing benefits like health insurance coverage while they search for new employment opportunities. This safety net can make sure that employees who are laid off are able to transition comfortably into new roles or retirement more easily than if these arrangements weren’t in place.

Finally, ensuring that language surrounding discrimination is included within the terms of any severance agreement is also incredibly important - especially when you consider that older workers may be particularly at risk when faced with redundancy situations like this one. Having an experienced team working on your document makes sure that all parties involved receive fair treatment throughout the process - no matter their age or other protected characteristics they may have under local law where applicable.

In conclusion, having an experienced lawyer help with creating your severance agreement is essential to ensure everyone involved receives appropriate protection from the law and equitable treatment throughout negotiations up until finalizing the document itself. Read on below for step by step guidance from Genie AI’s community template library on how you can access high quality legal documents without paying expensive lawyer fees today!

Definitions (feel free to skip)

Severance Agreement: A contract between an employer and an employee that outlines the terms of an employee’s departure from a company, usually with a payment or other compensation included.

Legal Implications: The potential legal ramifications of an action, agreement, or contract.

Compliant: Meeting the requirements of an agreement, law, or regulation.

Non-Compete Clause: A provision in an agreement that prohibits an individual from working for a competitor after their employment ends.

Legal Rights: Rights granted to an individual by law or contract.

Legal Obligations: A contractual or legal requirement to take a certain action or behave in a certain way.

Negotiating: The process of discussing and reaching an agreement on the terms of a contract or agreement.

Enforceable: Having the power to be enforced, or able to be carried out.

Applicable Laws: Laws and regulations that are relevant to a particular agreement or situation.

Disputes: A disagreement between two or more parties.

Remedies: A solution or action taken to address a wrong or to compensate for a loss.

Contents

• Research the purpose of the severance agreement and the legal implications of creating one.
• Identify the terms and conditions of the severance agreement, including the severance package and any non-compete clauses.
• Define the legal rights and obligations of both the employer and the employee.
• Outline the process for creating and negotiating the agreement, including the role of legal counsel.
• Document the agreement and ensure that it is enforceable and compliant with applicable laws.
• Develop a strategy for protecting the employee’s interests throughout the process.
• Establish strategies for resolving disputes and handling potential disagreements between the parties.
• Draft the severance agreement.
• Review the agreement with legal counsel and any other relevant parties.
• Sign and execute the agreement.

Get started

Research the purpose of the severance agreement and the legal implications of creating one.

• Research the purpose of a severance agreement, such as providing compensation to an employee upon termination and the legal implications of creating one.
• Read applicable labor laws and regulations in your state to ensure that the agreement is compliant with any relevant legislation or standards.
• Consult with an attorney to understand the specifics of the agreement, including any potential liabilities and obligations.
• Review any existing contracts and employee handbooks to ensure that the agreement does not conflict with any existing documents.

Once the research is complete, the task of researching the purpose and legal implications of the severance agreement is complete and the next step can be addressed.

Identify the terms and conditions of the severance agreement, including the severance package and any non-compete clauses.

• Review laws and regulations related to severance agreements in your state or country
• Consult with a lawyer to ensure all terms and conditions are legal
• Request input from both the employer and employee to ensure all parties are in agreement
• Decide on the severance package (amount, duration, etc.)
• Decide if any non-compete clauses should be included
• Make sure the terms and conditions are clearly written in the agreement
• Have all parties sign the agreement
• You can check this step off your list when all parties agree to the terms and conditions and the agreement has been signed.

Define the legal rights and obligations of both the employer and the employee.

• Carefully review the employment contract to identify any legal rights or obligations owed to either party.
• Consider the employment laws in the jurisdiction that govern the severance agreement, such as minimum notice periods or other protections.
• Draft a clear and concise document that outlines the legal rights and obligations of both the employer and the employee.
• Have legal counsel review the agreement to ensure that it complies with applicable laws.

When you can check this off your list:

• Once the legal rights and obligations of both the employer and the employee have been defined, the draft agreement should be reviewed by legal counsel to ensure compliance with applicable laws.

Outline the process for creating and negotiating the agreement, including the role of legal counsel.

• Consult with legal counsel for advice on the agreement and to ensure that it is compliant with applicable laws.
• Negotiate the agreement between the employer and employee, addressing any legal issues that have been raised.
• Finalize the agreement and ensure that both parties have signed it.
• Keep a copy of the agreement for your records.

When the agreement has been negotiated, documented, and both parties have signed it, you can check this step off your list and move on to the next step.

Document the agreement and ensure that it is enforceable and compliant with applicable laws.

• Review existing templates of severance agreements and customize them to meet the specific needs of your company.
• Consult with legal counsel to ensure that the agreement is enforceable under applicable laws.
• Draft a legally binding and compliant severance agreement that meets the needs of both the employer and employee.
• Have the agreement reviewed by legal counsel and make necessary edits.
• Once reviewed and approved, have the agreement signed by both parties.

When you can check this off your list and move on to the next step:

• Once the agreement is signed by both parties and any necessary edits have been made, you can move on to the next step.

Develop a strategy for protecting the employee’s interests throughout the process.

• Consider the employee’s goals and needs before drafting the agreement
• Make sure the employee understands what the agreement is and what it is not
• Ensure that the employee is aware of their legal rights
• Make sure the employee is aware of their rights to severance pay, benefits and other entitlements
• Explain the terms of the agreement to the employee in clear language
• Obtain the employee’s informed consent to the agreement
• Ensure that the employee is not signing the agreement under duress or undue influence
• When possible, have the employee discuss the agreement with an independent legal advisor
• Make sure the employee is aware of any deadlines or conditions in the agreement

Once you have followed the above steps and ensured that the employee’s interests are protected throughout the process, you can check this step off your list and move on to the next step.

Establish strategies for resolving disputes and handling potential disagreements between the parties.

• Have the employee and employer agree on the resolution process for any disputes that may arise out of the severance agreement.
• Consider a mediation process as a way of resolving any disputes in an amicable manner.
• Outline the process to be followed in the event of a disagreement over the severance agreement.
• Establish a timeline for resolution of any disputes that may arise.
• Agree on the terms of the agreement in the event of a dispute.
• Determine the forum or jurisdiction to be used in the event of a dispute.

Once the strategies for resolving disputes and handling potential disagreements between the parties have been established, you can check this off your list and move on to drafting the severance agreement.

Draft the severance agreement.

• Draft a legal document that outlines the terms of the severance agreement
• Include all relevant details such as the amount of severance, any benefits, timelines, and any non-disclosure requirements
• Consider any applicable state, federal, and local laws
• Create a signature page with signature lines for the employee, employer, and any other relevant parties
• Once the agreement is drafted, review it with legal counsel to ensure that it is legally sound

Once the agreement is complete and all relevant parties have reviewed it, you can move on to the next step.

Review the agreement with legal counsel and any other relevant parties.

• Obtain a copy of the severance agreement
• Review the agreement with a legal counsel
• Involve any other relevant parties (such as the employee’s supervisor or HR representative) in reviewing the agreement
• Answer any questions and address any concerns raised by the legal counsel and/or other relevant parties
• Make any necessary edits to the agreement based on their input
• When all parties have agreed to the terms of the agreement, you can check this off your list and move on to the next step.

Sign and execute the agreement.

• Ensure that both parties have signed the agreement.
• Make sure that the agreement is notarized if required by state law.
• Obtain a copy of the agreement for both parties.
• Once all documents have been signed, the agreement is considered legally binding.
• You will know that this step is complete when both parties have signed and obtained copies of the agreement.

FAQ:

Q: What is a severance agreement?

Asked by Patrick on January 5th, 2022.
A: A severance agreement is a legally binding contract between an employer and an employee that outlines the terms of an employee’s separation from the company. It generally outlines the details of the separation, such as the type of compensation and benefits they will receive, the duration of the agreement, and any other legal obligations the employee may have. It is important to note that a severance agreement is not the same thing as a termination notice or severance package - these are two different types of agreements.

Q: What are some common elements in a severance agreement?

Asked by Leticia on February 15th, 2022.
A: Severance agreements typically contain information about the terms of separation, including any compensation and benefits received, such as vacation pay, health insurance coverage, and outplacement services. Other common elements include releasing both parties from any legal claims, non-disclosure clauses, non-compete clauses, and any other terms and conditions specific to each employer.

Q: What should I consider when creating a severance agreement?

Asked by Eddie on June 8th, 2022.
A: When creating a severance agreement, there are several key considerations to keep in mind. First, make sure you understand your local laws and regulations regarding employment termination and severance agreements. Second, it is important to ensure that both parties have agreed to all terms and conditions outlined in the document. Finally, always consult with an experienced lawyer or attorney before signing a severance agreement so you can understand your legal rights and obligations.

Q: How long does a severance agreement last?

Asked by Jesus on May 4th, 2022.
A: The length of a severance agreement depends on the specific terms agreed upon by both parties. Generally speaking, most agreements last between six months to one year following the date of termination. However, some agreements may be longer or shorter depending on the circumstances surrounding the termination.

Q: How do I terminate an employee with a severance agreement?

Asked by Nicole on August 2nd, 2022.
A: Terminating an employee with a severance agreement can be complicated depending on your local laws and regulations. Generally speaking, it is best practice to provide written notice of termination to the employee in advance so they can review their options and understand their rights under the agreement. Additionally, it is important to ensure that both parties have signed off on all elements of the document before it is finalized and enacted.

Q: Are there any tax implications associated with severance agreements?

Asked by David on July 30th, 2022.
A: Yes - depending on your local laws and regulations there may be tax implications associated with a severance agreement. Generally speaking, most employers are responsible for withholding taxes from any payments made under a severance agreement as required by law. Additionally, employees may need to report any payments received under a severance agreement as taxable income on their annual tax return. It is important to consult with an experienced accountant or tax professional for further advice about potential tax implications surrounding your situation.

Q: What happens if I don’t create a severance agreement?

Asked by Elizabeth on April 21st, 2022.
A: If you do not create a legally binding document outlining the terms of separation between yourself and your employee(s), then you may be subject to legal action from them if they feel that they have been wrongfully terminated or treated unfairly during their employment period with you. Additionally, without a proper agreement in place you may also be subject to penalties for non-compliance with any local laws or regulations governing employment termination in your jurisdiction. It is important to consult with an experienced lawyer or attorney for further advice about your specific situation.

Q: Can I negotiate my own severance package?

Asked by Jacob on November 10th, 2022.
A: Yes - in many cases it is possible to negotiate your own severance package if you feel that your employer’s offer is not fair or equitable for you given your circumstances surrounding your termination of employment. However it is important to remember that even if you successfully negotiate better terms for yourself than what was initially offered by your employer they still must sign off on the final version of the document before it becomes legally binding for both parties involved in the process. Additionally it may be beneficial for you to consult with an experienced lawyer or attorney who can provide advice about potential options available for negotiation as well as any legal implications associated with them.

Q: Do I need a lawyer when creating a severance agreement?

Asked by Jennifer on October 26th, 2022.
A: Although it is not always required to have an experienced lawyer present when creating a severance agreement it can be beneficial in order to ensure that all parties involved understand their rights and obligations under the contract as well as any potential legal implications associated with them. Consulting with an experienced lawyer can also help ensure that all elements outlined in the document are fair and equitable for both parties involved in order for it to be legally binding upon signing by all parties involved in this process.

Example dispute

Suing a Company for Breach of Severance Agreement

• Plaintiff must prove that there was a valid severance agreement in place between them and the defendant.
• Plaintiff must also prove that the defendant failed to adhere to the terms of the agreement, such as by failing to make payments on time or not providing the agreed-upon compensation.
• Plaintiff must also show that they have suffered damages as a result of the breach.
• The court may award damages for any losses the plaintiff has suffered, such as lost wages, medical bills, and other costs.
• Plaintiff could also seek an injunction ordering the defendant to adhere to the terms of the agreement.
• Plaintiff may also be able to recover legal fees and costs associated with filing the suit.
• Settlement of the suit may be reached through negotiation, mediation, or arbitration.

Templates available (free to use)

Employment Severance Agreement
Severance Agreement And General Release
Severance Agreement And Release

‍