Creating an Employee Separation 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

Employee separation agreements are of paramount importance for both employers and employees. They provide clarity and certainty, ensuring that each party has a comprehensive understanding of the terms and conditions of the agreement.

From an employer’s perspective, having a thoroughly drafted employee separation agreement can help shield them from any potential legal risks. It also offers protection against any costly litigation or financial settlements. The agreement should include an accurate description of the employee’s position and responsibilities, as well as any compensation and benefits they may be entitled to. Additionally, restrictions such as non-compete or non-disclosure clauses should be clearly outlined.

For employees, having clear guidance on their rights helps to ensure peace of mind over how their separation will be handled, including details about the entitlements they may receive for their time with a company.

When considering an employee separation agreement it is imperative to take into account various legalities and financial implications to guarantee fairness for both parties involved in the contract. For this reason, seeking legal advice beforehand is highly recommended by Genie AI’s team - who provide free templates and access to our community template library so anyone can draft high quality documents without consulting a lawyer - enabling all users to protect themselves whilst navigating through this process with confidence.
Read on for our step-by-step guide on creating an effective employee separation agreement along with information on how you can access Genie AI’s free template library today!

Definitions (feel free to skip)

Establishing: Creating or setting up a process or system.
Expectations: Beliefs or desires about what should happen in a certain situation.
Rights: Powers, privileges, or immunities granted by a government or other authority.
Obligations: Responsibilities or duties owed by a person to another.
Compensation: Money or other benefits given as payment for services or loss.
Benefits: Something extra that is given or offered to someone as part of an agreement.
Negotiating: Discussing and trying to reach an agreement or understanding.
Drafting: Writing down a document in a formal or official manner.
Accuracy: The quality of being exact or correct.
Legality: The state or quality of being allowed by law.
Signing: Writing one’s name on a document to signify agreement or acceptance.
Notarizing: The formal process of certifying a document as authentic or genuine.
Severance: The act of ending a relationship or contract.
Addressing: Dealing with a particular issue or problem.

Contents

• Establishing the purpose of the agreement
• Discussing the terms and conditions of the separation
• Negotiating the terms of separation, including:
• Compensation
• Benefits
• Obligations
• Drafting the agreement
• Reviewing the agreement for accuracy and legality
• Signing the agreement
• Notarizing the agreement
• Establishing the details of any severance packages
• Providing advice and resources to both parties to ensure understanding of the agreement
• Addressing any future disputes and/or changes in the agreement

Get started

Establishing the purpose of the agreement

• Clearly explain the purpose of the agreement and why the employee is leaving
• Ensure that both parties agree on the details of the separation
• Obtain signatures from both the employer and employee to confirm the agreement
• Once both employer and employee have signed the agreement, the process of separating the employee is complete and the separation agreement is finalized.

Discussing the terms and conditions of the separation

• Have a discussion with the employee about the terms and conditions of their separation from the company.
• Make sure to cover topics such as any severance pay, outplacement services, vacation pay, and other benefits that may be relevant.
• Agree upon the terms that both the employer and employee feel comfortable with.
• Ensure that both parties understand the terms and conditions of the agreement before signing.

Once the terms and conditions of the agreement have been discussed and agreed upon, you can move on to the next step: Negotiating the terms of separation.

Negotiating the terms of separation, including:

• Talk to the employee to come to an agreement about the terms of the separation.
• Discuss any payments or benefits that will be part of the agreement.
• If necessary, consult a lawyer about the terms of the separation agreement.
• You can check off this step once you and the employee have agreed on the terms of the separation agreement.

Compensation

• Establish any compensation the employee may be entitled to receive after separation, such as unused vacation pay or a severance package
• Specify if there are any additional payments or reimbursements due to the employee as part of the separation agreement
• Determine if the employee will receive any incentive-based bonuses or awards based on performance prior to separation
• Agree on any non-compete clauses or other restrictions that may apply to the employee
• Determine if the employee is subject to any forfeiture of stock or other equity awards
• When all conditions have been agreed upon and documented, both parties can sign the separation agreement.

Benefits

• Identify which benefits the employee is entitled to receive upon separation (e.g. vacation pay, health insurance coverage, etc.)
• Determine the amount of benefits to be paid out, if applicable
• Specify the terms of the agreement regarding the payment of benefits to the employee
• Ensure that any benefits paid out are compliant with all applicable laws
• Once all the details have been finalized, the employer should draft the agreement and have the employee sign it.

You can check this off your list once the employee has signed the agreement and all the details have been finalized.

Obligations

• Identify any obligations the employee may have, such as non-compete, non-disclosure, or restrictive covenants
• Set out the specific obligations the employee must comply with
• Draft the document in accordance with applicable laws
• Have the employee sign the document and keep a copy for the company records

You can check off this step when the obligations have been identified, drafted, and signed.

Drafting the agreement

• Research the employee’s rights and responsibilities in the separation process
• Gather information from the employee and former employer, including details about the employee’s position and salary
• Draft an agreement that outlines the terms of the separation, including severance pay and any other benefits associated with the termination
• Ensure that the agreement complies with all applicable laws and regulations
• When the agreement is completed, you can check off this step of the process and move on to the next step.

Reviewing the agreement for accuracy and legality

• Carefully read the agreement for any errors or omissions
• Check to ensure that the document is legally binding and that all statutory regulations are being met
• Have a qualified lawyer review the agreement
• Make sure all parties understand the terms of the agreement and that they are in agreement
• When the agreement is accurate and legally sound, you can move on to the next step: signing the agreement.

Signing the agreement

• Gather all parties who need to sign the agreement and have them sign either in person or electronically
• Ensure that all signatures are legible, valid, and include all necessary information (name, title, date, etc.)
• When all signatures are obtained, this step is complete and the agreement can be notarized.

Notarizing the agreement

• Obtain the notary’s signature, seal, and printed name on all pages of the agreement
• Make sure the notary’s signature, seal, and printed name are completely legible
• Ensure the notary is registered in the state where the agreement is executed and has a valid commission
• Verify the notary’s commission expiration date
• Once the agreement has been notarized, you can move on to establishing the details of any severance packages.

Establishing the details of any severance packages

• Determine the details of any severance packages that will be offered, such as financial compensation, access to benefits, and any other details that may be relevant
• Make sure to include the duration of these packages and any other specific information related to them
• Account for any restrictions or limitations, such as a non-compete clause or other stipulations
• Once the details of the severance package have been established, move on to the next step of notarizing the agreement

You’ll know you have completed this step successfully when the details of any severance packages have been established and agreed upon by both parties.

Providing advice and resources to both parties to ensure understanding of the agreement

• Make sure both parties are aware of their legal rights and obligations.
• Provide both parties with a copy of the separation agreement and ensure they understand the contents.
• Explain any relevant details of the agreement, such as any severance packages, to both parties.
• Ensure both parties are given the opportunity to ask questions and seek advice if they need it.
• Encourage both parties to seek independent legal advice if they wish.
• Allow both parties the opportunity to review and discuss the agreement before signing.

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

• Once both parties have confirmed they understand the agreement and have been given the opportunity to seek advice if they need it.

Addressing any future disputes and/or changes in the agreement

• Draft a clause that explains both parties’ rights and obligations if a dispute arises from the agreement
• Draft a clause that outlines how future amendments to the agreement will be handled
• Have both parties agree to the dispute resolution and amendment clause
• Check off this step once both parties have signed the agreement and the clause has been inserted into the document

FAQ:

Q: What is the difference between a UK and US Employee Separation Agreement?

Asked by John on January 23rd 2022.
A: A UK Employee Separation Agreement is a legally binding document that sets out the terms and conditions of an employee’s departure from their job. It outlines the employee’s rights and obligations, including any payment or compensation they may receive. In the US, an Employee Separation Agreement is also known as a Severance Agreement or a Separation Agreement. Generally, it covers the same topics as a UK agreement but may also include additional provisions such as non-compete clauses.

Q: What legal considerations should I keep in mind when creating an Employee Separation Agreement?

Asked by Emma on February 9th 2022.
A: It is important to keep in mind that any agreement that you create must comply with relevant laws and regulations. Depending on your jurisdiction, you may need to include specific provisions in your agreement to ensure that it is legally binding. Additionally, you should consider any potential tax implications of the agreement, such as whether any payments or compensation are subject to income tax or national insurance contributions. Finally, it is important to ensure that the agreement does not contain any clauses which could be deemed discriminatory or unfair.

Q: How do I make sure that my Employee Separation Agreement is enforceable?

Asked by Noah on April 5th 2022.
A: To make sure that your Employee Separation Agreement is enforceable, it is important to ensure that it complies with relevant laws and regulations in your jurisdiction. You should also include all relevant information in the agreement, such as the parties involved, details of the employee’s job role, and a description of the terms and conditions of their separation from their job. Additionally, you should ensure that both parties sign the agreement to make it legally binding.

Q: What should I do if my Employee Separation Agreement is breached?

Asked by Olivia on June 18th 2022.
A: If your Employee Separation Agreement has been breached, then you should take action as soon as possible. Depending on the nature of the breach, this could include negotiating a resolution with the other party or taking legal action against them. It is important to be aware of your rights and obligations under the agreement before taking any action so that you can ensure that you are acting within the law.

Q: What are some common clauses found in an Employee Separation Agreement?

Asked by Jack on August 4th 2022.
A: Common clauses found in an Employee Separation Agreement include provisions for payment or compensation for loss of job, release from liability for any claims related to the employee’s job role, confidentiality agreements, non-compete clauses, and clauses relating to intellectual property rights. Depending on your jurisdiction and industry sector, there may also be additional legal requirements which need to be included in your agreement.

Q: How do I ensure that both parties understand and agree to an Employee Separation Agreement?

Asked by Abigail on September 15th 2022.
A: To ensure both parties understand and agree to an Employee Separation Agreement it is essential to discuss all aspects of the agreement before signing it. This includes discussing any potential issues which could arise due to differences in laws between jurisdictions or industry sectors, or differences in business models between companies (such as SaaS vs B2B). Additionally, both parties should ensure they read through and understand all provisions contained within the agreement before signing it so that there are no misunderstandings later down the line.

Example dispute

Suing Companies for Breach of Employee Separation Agreement

• Plaintiffs can sue companies for breach of employee separation agreements if they believe the company violated the terms of the agreement.
• The plaintiff must demonstrate that the company violated the terms of the agreement in order to win the case.
• The plaintiff must also show that the breach resulted in damages to them.
• Common violations of employee separation agreements include not paying the agreed-upon severance, not providing the agreed-upon benefits, or not abiding by the agreed-upon non-compete clause.
• If the plaintiff is successful in their case, they may be awarded damages such as unpaid wages, benefits, and/or compensation for emotional distress.
• The court may also issue an injunction ordering the company to abide by the agreement or awarding the plaintiff a monetary award.

Templates available (free to use)

Employee Separation Agreement

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