Employee separation agreement
The Employer and Employee may be referred to individually as “Party” and collectively as “Parties”.
This Employment Separation Agreement (“Agreement”), is made valid upon signature by both Parties (the “Effective date”).
1. General
1.1 Considering their mutual covenants, and for other good and valuable consideration in this Agreement, of which the receipt and sufficiency are hereby acknowledged, the Parties further agree to the provisions below:
1.2 Nature of Separation: The Parties, who previously entered into an employment agreement on [Insert Date], now hereby agree to discontinue the Employee’s employment relationship with the Employer as [Insert Designation], effective on [Insert “Separation Date”] (hereinafter referred to as the "Separation Date") in an amicable manner according to the terms and conditions provided in this Agreement.
2. Terms and Conditions:
2.1 Severance Pay: The Employer agrees to make a single payment to the Employee in the amount of [Insert Amount & currency] as a severance payment. This payment shall be subject to appropriate taxes and other payroll deduction required by law.
2.2 Separation Period: The Employee shall be given [Insert days] business days after the Separation Date to prepare for the transition of work to the new employee who will take over the duties and responsibilities.
2.3 Return of Property: The Employee shall return all of the Employer’s properties within [Insert Date] business days following the Separation Date. The said properties include but are not limited to any files, documents, handbooks, manuals, computer printouts, credit cards, vehicles, equipment, tools, phones, radios, other electronic data, and any other form of property the Employer owns.
2.4 Release of Claims: The Employee hereby releases and forever discharges the Employer, including its assign, representatives, affiliates, successors, and current employees from any claim, demand, causes of action, obligations, damages, liabilities, and charges, which may have arisen during an employment period.
2.5 Breach: The Employee acknowledges that any breach of obligations herein is considered a material breach. Thus, the Employer shall be entitled to appropriate injunctive relief and to recover reasonable cost and legal fees incurred if the Agreement is threatened by breaching.
2.6 Non-Compete: The Parties agree that the Employee, during the employment period, shall not engage in any activity that directly or indirectly competes with the business of the Employer. Furthermore, the Employee shall be given [Insert time period] before applying to a company of similar nature as the Employer.
2.7 Entire Agreement: This Agreement, along with the attached documents, shall constitute the entire Agreement between the Parties. This Agreement shall also overrule any previous agreement, either verbal or written.
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What is an employee separation agreement?
An employee separation agreement outlines the terms and conditions of the mutual separation between an employer and an employee. It’s typically used when the employment relationship ends, whether due to a layoff, resignation, or other circumstances.
Unlike a termination letter, which can feel abrupt and formal, this agreement aims to create a more respectful and collaborative exit strategy. It's a way to ensure that both parties understand the terms of the separation and can move forward with clarity and dignity.
For employers, the agreement protects against potential legal issues that may arise from the termination of employment. It sets clear expectations and boundaries, reducing the risk of disputes or misunderstandings.
On the other hand, employees benefit from the agreement by having the opportunity to negotiate terms such as a severance package or continued healthcare benefits upon departure. By signing the contract, employees gain assurance of the terms of their departure and any benefits they may receive, providing them with a sense of financial security during the transition period.
What is an employee separation agreement used for?
Employers commonly use separation agreements to protect themselves from potential legal disputes arising after termination. However, these agreements can also include provisions that benefit the departing employee, such as severance pay, continued healthcare coverage, or assistance with job placement.
While it's never an easy decision, terminating an employment agreement may sometimes be necessary, especially if an employee fails to meet performance expectations despite efforts to improve.
What to include in a separation agreement?
The separation agreement must state the employee’s termination date and ensure that the employer is up to date with all current payments due. If the employee will be given severance pay, the amount and manner of payment must also be addressed in the form.
The calculation of the severance is often included in a prior employment or severance contract. Any company property that the employee needs to return should also be put into writing to ensure its return. In addition to any existing non-disclosure agreement (NDA) that the employee may have with the employer, the employer may include a non-compete clause in the contract, which restricts the employee’s ability to compete against the employer’s business.
The contract must be signed by both parties to become legally binding. However, depending on your country, state, and industry, non-compete clauses may not always be enforceable.
The separation agreement lists the conditions both parties agree to and the legalities of binding the contract. The conditions will supersede other agreements, including your employment contract, so pay attention to the contract terms.
- Waiver of Legal Claims: As part of the agreement, employees are typically required to waive any potential legal claims against the employer. These may include claims related to employment law, compensation, or discrimination. For employers, this is a crucial aspect of the agreement to mitigate future legal risks.
- Severance Package Offer: Offering a severance package to the departing employee can incentivize them to sign the agreement.
- Additional Clauses: The agreement may include additional clauses tailored to the specific circumstances, such as confidentiality or non-compete agreements. It may also stipulate the departing employee's return of company property or tools.
How to handle a separation agreement of employment (the right way)
The process for handling a separation agreement varies depending on whether it's voluntary or involuntary. In the case of voluntary separation, where an employee resigns or retires, they typically provide a two-week notice before their departure. However, involuntary separation, such as termination due to poor performance, requires more immediate action, and the separation agreement must be shared promptly with the employee.
Regardless of the circumstances, clear communication and sensitivity to the employee's situation are essential throughout the process.
Share and sign an employment separation agreement easily
Separation is never easy, but it doesn’t have to be more challenging with a long, complicated contractual process.
With Contractbook, you can simplify sharing and signing an employment separation agreement. Our platform allows you to transform your document into a digital format, making it easy to share with multiple recipients and request legally binding e-signatures within the platform.
With Contractbook, you can ensure the security of your documents and streamline the entire signing process, saving time and effort for both parties involved.
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This agreement outlines the terms and conditions for the separation of an employee from their employer. It covers severance pay, return of company property, release of claims, non-compete obligations, and other provisions related to the termination of employment. The agreement aims to ensure an amicable separation while protecting the interests of both parties.
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