Separation Pay Agreement Template for United States

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Key Requirements PROMPT example:

Separation Pay Agreement

"I need a Separation Pay Agreement for a senior software engineer who is being laid off as part of a company restructuring, with a six-month severance package and standard non-compete provisions effective March 1, 2025."

Document background
A Separation Pay Agreement becomes necessary when an employer wishes to provide severance benefits to a departing employee while securing legal protections for the company. This document is commonly used in the United States during voluntary separations, layoffs, or negotiated departures. The agreement details financial compensation, benefits continuation, and includes essential provisions such as release of claims and ongoing obligations. It must comply with federal legislation including the Age Discrimination in Employment Act (ADEA) and state-specific employment laws. The agreement serves to prevent future disputes and provides clarity for both parties regarding their rights and obligations post-employment.
Suggested Sections

1. Parties: Identifies the employer and employee entering into the agreement

2. Background/Recitals: States the context of the separation and purpose of the agreement

3. Definitions: Defines key terms used throughout the agreement

4. Separation Date: Specifies the employee's last day of employment

5. Separation Payment: Details the amount, timing, and conditions of severance payment

6. Release of Claims: Employee's waiver of legal claims against the employer

7. Return of Company Property: Requirements for returning company assets and materials

8. Governing Law: Specifies which jurisdiction's laws govern the agreement

Optional Sections

1. Non-Compete Provisions: Restrictions on future employment - use when protecting company interests from competition is crucial

2. Non-Solicitation: Restrictions on soliciting employees or customers - use when protecting company relationships is important

3. Confidentiality: Ongoing obligations regarding confidential information - use when employee had access to sensitive information

4. Benefits Continuation: Details about post-employment benefits - use when offering extended benefits as part of package

5. Outplacement Services: Details of career transition assistance - use when providing career transition support

Suggested Schedules

1. Schedule A - Separation Payment Details: Detailed breakdown of severance payments and timing

2. Schedule B - Company Property Checklist: List of company items to be returned

3. Appendix 1 - ADEA Disclosure: Required disclosure for employees over 40

4. Appendix 2 - Benefits Summary: Summary of continuing benefits and COBRA rights

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Industries

ADEA and OWBA Compliance: Age Discrimination in Employment Act and Older Workers Benefit Protection Act requirements, including mandatory waiting periods and specific language for employees over 40

FLSA Considerations: Fair Labor Standards Act requirements regarding wage and hour calculations, overtime pay, and final compensation

ERISA Compliance: Employee Retirement Income Security Act considerations for handling retirement benefits and continuation of benefits

WARN Act Requirements: Worker Adjustment and Retraining Notification Act compliance for mass layoffs or plant closings if applicable

Title VII and ADA Compliance: Civil Rights Act and Americans with Disabilities Act considerations to ensure non-discriminatory separation practices

IRC Section 409A: Internal Revenue Code requirements regarding deferred compensation and timing of separation payments

Tax Withholding Requirements: Federal and state tax withholding obligations, including FICA and Medicare withholding requirements

State-Specific Compliance: State-level requirements for wage payment, final paycheck timing, release language, and non-compete provisions

Release of Claims: Comprehensive release language covering all potential claims, with specific requirements for different types of claims

COBRA Rights: Healthcare continuation coverage rights and notification requirements under COBRA

Confidentiality Provisions: Requirements for maintaining confidentiality of company information and trade secrets post-separation

Non-Disparagement Clauses: Provisions preventing both parties from making negative statements about each other

Company Property Return: Requirements and procedures for returning company property, including intellectual property and physical assets

Unemployment Compensation: Considerations regarding unemployment benefits eligibility and company's position on unemployment claims

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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