Breaking Ties: Understanding Employee Separation Agreements

There are a myriad of terms often used to indicate that a period of employment has come to an end, and each carries its own distinct connotation. Yet, “separation of employment” seems to cover all of them as a general overhead; while not going as far as to define the nature of the arrangement – specifically — whether the separation was voluntary or involuntary.

Termination of employment


The purpose and service of an actual agreement, signed by both employee and employer, is to act as a legal assurance against the company being held to any binding claims, which may or may not have been active during any portion of the employee’s tenure (including the future).

More immediate effects are that the employee is no longer able to sue for severance pay or wrongful termination after signing most such documents.

Related:  Resigned to Resigning: The Proper Way to Leave Your Job

What to Expect as an Employee

If you find yourself on the receiving end of such documentation, it’s helpful to know the broad strokes and implications for signing (or not signing). Peruse the entire document very carefully, paying special attention to the stated reason(s) for separation and – most especially – the terms of separation. Terms may include:

  • Severance Pay
  • Severance Packages
  • Benefits in Lieu of Pay
  • Non-compete Agreements
  • Confidentiality Provisions and much more

The noted importance of having a solid and comprehensive understanding of these terms is absolutely vital because they are legally binding after signing. If you happen to gloss over a provision restricting your ability to advance your career in a given field or geographic area, for example, you may find yourself in a limiting, if not disconcerting position.  Yes, these may be challenged legally (especially if they present an unreasonable overreach), but such legal disputes are costly and time-consuming, especially while simultaneously focusing on the continuation and advancement of your career.

What to Expect as an Employer

There are endless reasons why employees may leave your organization. They range within the spectrum of negative to positive; from moving to a new location or advancing their career, to being let go due to poor behavior or performance. You must take several aspects into careful account, especially when considering the level or position of the former employee. For instance, it can be a costly oversight to gloss over the essentials of ensuring that confidentiality agreements are properly attended to, or that the employee’s benefit status (including sick pay or unused vacation time) is fully addressed. It is also a vital matter to ensure that the integrity of your organization’s security remains intact by disabling the employee’s security access to the premises and disabling their passwords and access to the company’s computer systems and networks.

Many states are “at will” working states, which itself, eases much of the concern over possible wrongful termination claims, but for those that are not, it is always prudent to have your HR department check all points with a thorough exit interview, thus sidestepping any potential claims of discrimination or unfair treatment. It is always advisable, regardless of a given scenario’s context, to have a policy for regular written documentation of employee performance.

Close-up of businessmen handshaking in working environment


The Overview

Drawing to conclusion, we’ll circle back to refocus on a few tips for the employee side of the picture. Remember that the signing of a separation agreement is in no way mandatory, and given that signing waves your right to legally contest issues, it is always best to first decide without duress, whether you actually want to sign in the first place. Particularly, be on the lookout for any clauses – and they can be innumerable – that may in any way affect your ability to find employment elsewhere. Regardless of the circumstances, every step is a step forward. Make certain you have your eyes open and are comfortable with your footing.

Fred Coon, CEO

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