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Published On: Thu, Jul 23rd, 2020

What is an Employee Separation Agreement

It is never a fun process to terminate an individual’s position within a company. With such a high emotional tax on these events some companies and individual workers may feel latter that there was wrongful termination or other discrimination. These feelings can lead to lengthy lawsuits and can ultimately cause a lot of headache and cost a lot of money. A employee separation agreement is the remedy to these scenarios to ensure they never occur in the first place. Below is a look into what an employee separation agreement is and what it can do for both the worker and the company. 

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What is it?

A separation agreement is a document that is often provided by a business terminating an individual. The document is a legal agreement to specified terms that ensures there is no litigation or future legal action that will be taken toward the company. While there is nothing legally wrong with terminating an employee there are laws that protect certain instances of wrongful termination. This would include being fired on the basis of religious belief, gender, race, or disability. Even if it is not suspected by either party that there was wrongful termination it is advisable to have an agreement to ensure that the separation goes as smoothly as possible. 

Benefits to Employers

Arguably employers get the most benefit from utilizing separation agreements. Often by accompanying these documents with severance packages, it ensures that the employee being terminated has an incentive to not go after the company legally. The worst case scenario for a company that does not utilize separation agreements would be if an employee receives severance yet they then turn around and sue the company for even more money. A separation agreement gives the company protection against the possibility of future lawsuits and can greatly reduce the risk of lawsuits. An example of this would be the firing of a woman or a minority group. While initially it may seem like a clean break, some unknown circumstances to the company may come up where it then appears that the company fired an individual on a basis of discrimination. The employee then pursues the company legally and ultimately costs the company time, resources, and money to resolve. By having a drafted separation agreement the company is able to reassure itself as well as the employer that there will be no future conflicts between the two parties. Non-disclosure agreements may also be tied into the agreement to ensure an individual does not share insider information to competitors. 

Benefits to Employees

Many separation agreements are created in a way where protection is not only given to the company but is also given to the employee. When an employee is terminated it may be due  to budget cuts, poor performance, an undesirable action, or other reason. As a part of many separation agreements there are clauses that prevent a company from talking poorly about the employee to other companies. This prevents what is known as blacklisting where a company actively ensures that an employee is not hired elsewhere. It is advantageous for an employee to sign a separation agreement if they feel blacklisting may occur, or if the agreement is tied to a severance package.  

In short an employee separation agreement is a legal paper that ensures a smooth termination of a position and an employee from a company. By tying an employee separation agreement into a severance package or non-disclosure agreement you give the employee an advantage to signing and prevent a potential lawsuit. As an employee one may be able to negotiate a better severance utilizing a separation agreement if one feels that there was wrongful termination involved in the termination of the position. Ultimately a separation agreement is a win-win for both sides of the separation.

Author: Jacob Maslow

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