Employee Separation Agreement - United States

Employee Separation Agreement for the United Kingdom

Employee Separation Agreement Template for United States

An Employee Separation Agreement is a legally binding contract under U.S. federal and state law that formalizes the termination of an employment relationship between an employer and employee. This document outlines the terms and conditions of the separation, including severance payments, benefits continuation, release of claims, and post-employment obligations. It must comply with various federal regulations including the Age Discrimination in Employment Act (ADEA), Title VII of the Civil Rights Act, and state-specific employment laws. The agreement typically includes provisions for confidentiality, non-competition, and non-solicitation, while providing protection for both parties through mutual releases and clearly defined obligations.

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What is a Employee Separation Agreement?

The Employee Separation Agreement serves as a critical risk management tool in U.S. employment relationships, typically used when an employment relationship is terminated either voluntarily or involuntarily. This agreement is essential for protecting both employer and employee interests by clearly documenting the terms of separation, including financial arrangements, continuing obligations, and legal releases. The document must carefully balance compliance with federal laws (such as ADEA and OWBPA for employees over 40) and state-specific requirements while addressing practical concerns such as severance pay, benefits continuation, and post-employment restrictions. An Employee Separation Agreement is particularly important in situations involving senior employees, sensitive positions, or when significant severance benefits are being provided. It helps prevent future disputes by providing clarity on all aspects of the separation and obtaining a release of claims from the departing employee.

What sections should be included in a Employee Separation Agreement?

1. Parties: Identification of employer and employee with full legal names and addresses

2. Background: Brief description of employment relationship and reason for separation

3. Definitions: Key terms used throughout the agreement including defined terms for Separation Date, Effective Date, and Confidential Information

4. Separation Date: Clear statement of employment termination date and final day of employment

5. Severance Payment: Details of any severance compensation, payment schedule, and tax implications

6. General Release: Employee's comprehensive release of claims against employer, including specific reference to applicable federal and state laws

7. Confidentiality: Obligations regarding confidential information and terms of the agreement

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

9. Governing Law: Jurisdiction and applicable law governing the agreement

What sections are optional to include in a Employee Separation Agreement?

1. Non-Compete: Restrictions on future employment, including duration and geographic scope, typically used when protecting legitimate business interests

2. Non-Solicitation: Restrictions on soliciting employees or customers, used to protect workforce and client relationships

3. Outplacement Services: Details of career transition support services offered by the employer

4. Reference Provision: Terms regarding future employment references and agreed communication about the separation

5. Benefits Continuation: Extended benefits coverage details including health insurance and COBRA information

What schedules should be included in a Employee Separation Agreement?

1. Schedule A - Final Compensation Calculation: Detailed breakdown of final payment including salary, bonuses, and accrued benefits

2. Schedule B - Company Property Checklist: Comprehensive list of company assets to be returned by the employee

3. Schedule C - Benefit Summary: Summary of continued benefits and COBRA information

4. Appendix 1 - Release of Claims: Detailed release language required by state and federal law

5. Appendix 2 - Non-Compete Terms: Detailed terms of non-compete restrictions where applicable

Authors

Alex Denne

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

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Free to use

Relevant legal definitions

Agreement

Employee
Effective Date

Confidential Information

Restricted Period
Territory
Intellectual Property

Revocation Period

Clauses

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Technology
Financial Services
Healthcare
Manufacturing
Professional Services
Retail

Relevant Teams

Compliance
External Counsel
HR
In-house Legal
Risk Management

Relevant Roles

Attorney
Chief Human Resources Officer
General Counsel
HR Manager
Legal Counsel

Industries

Age Discrimination in Employment Act (ADEA): Federal law requiring specific provisions for employees over 40, including 21-day consideration period, 7-day revocation period, and clear language about waiving age discrimination claims

Title VII of the Civil Rights Act: Federal law governing provisions regarding discrimination claims and requirements for valid release of claims

Americans with Disabilities Act (ADA): Federal law addressing considerations for disability-related claims and requirements for valid release

Fair Labor Standards Act (FLSA): Federal law governing wage and hour considerations, payment of final wages, and overtime calculations

Employee Retirement Income Security Act (ERISA): Federal law covering benefits continuation and retirement plan considerations in separation agreements

Consolidated Omnibus Budget Reconciliation Act (COBRA): Federal law mandating healthcare continuation requirements and notice obligations

Older Workers Benefit Protection Act (OWBPA): Federal law providing additional protections for older workers and specific requirements for valid waivers

State Labor Laws: State-specific requirements regarding final paycheck, vacation/PTO payout, and notice periods

State Non-Compete Laws: State-specific regulations governing enforceability requirements, duration restrictions, and geographic scope limitations for non-compete agreements

State Unemployment Compensation Laws: State-specific regulations regarding impact of separation agreement on benefits and reporting requirements

State Discrimination Laws: State-specific protected categories and release requirements beyond federal protections

State Severance Requirements: State-specific mandatory severance provisions and timing of payments

Worker Adjustment and Retraining Notification (WARN) Act: Federal law applicable in cases of mass layoffs or plant closings, requiring specific notice periods and procedures

National Labor Relations Act (NLRA): Federal law governing unionized employees and protected concerted activity provisions

Defend Trade Secrets Act: Federal law governing confidentiality provisions and trade secret protections in separation agreements

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Download a Standard Template

What is a Employee Separation Agreement?

What sections should be included in a Employee Separation Agreement?

What sections are optional to include in a Employee Separation Agreement?

What schedules should be included in a Employee Separation Agreement?

Authors

Alex Denne

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