Separation and Release Agreement: Texas
Authors: Katherine Hinde and Michelle Devlin, Littler
When to Use
An employer can use this separation and release agreement (also commonly known as a termination agreement or separation agreement with covenant not to sue) when terminating an employment relationship in Texas. Such agreements involve an exchange of consideration (i.e., something of value) between the employer and the employee. This should be something to which the employee is not already entitled under the existing employment relationship (e.g., severance pay) and in exchange for the employee providing something of value in return (e.g., a waiver of the right to pursue civil claims).
When a separation agreement is signed, a contract is created between the employer and employee, which demonstrates their intent to be bound by the terms of the agreement. However, this agreement is not to be used as a settlement of claims against the company. Unless an employer is contractually bound to provide severance, severance pay is not mandatory. Nonetheless, an employer may determine that offering severance pay is beneficial to the organization to promote goodwill or to prevent legal action.
An employer can customize this agreement to prepare a separation agreement that fits its particular circumstances.
[insert Company's full name]
Separation and Release Agreement: Texas
This Separation and Release Agreement ("Agreement") is entered into between [insert employee's name] ("Employee") and [insert Company's name] ("Company"). Employee and the Company (together, the Parties) agree as follows:
- Termination of Employment Relationship: Employee and the Company will end their employment relationship on [insert date of termination] ("Termination Date"). The Company may relieve the Employee of all duties and place the Employee on administrative leave prior to the Termination Date by providing written notice. Employee agrees not to seek reinstatement, future employment, or other working relationship with the Company or any of its affiliates after the Termination Date. This agreement does not prohibit, prevent or otherwise restrict Employee from working for the Company or any parent company, subsidiary, division or affiliate of the company.
- Acknowledgments: Employee acknowledges that the company relied on the following representations by Employee in entering into this agreement:
(a) Employee acknowledges that Employee does not have a claim of unlawful discrimination; retaliation; harassment; sexual harassment; abuse; assault; alleged criminal conduct; or other alleged unlawful employment practices or unlawful conduct against the Company or any of the Released Parties (as defined below).
(b) Employee has received all compensation due to Employee through the Termination Date as a result of services performed for the Company with the receipt of their final paycheck.
(c) Employee has reported to the Company any and all work-related injuries or occupational illnesses incurred by Employee during Employment with the Company.
(d) The Company properly provided any leave of absence because of Employee's or a family member's health condition or military service and Employee has not been subjected to any improper treatment, conduct or actions due to a request for or taking such leave.
(e) Employee has had the opportunity to provide the Company with written notice of any and all concerns regarding suspected ethical and compliance issues or violations on the part of the Company.
Consideration: In return for the Employee's promises in this Agreement, and provided that Employee signs and returns this Agreement and does not revoke it, the Company will pay Employee the following severance benefits: [(a)severance pay in the total gross amount of [insert dollar amount], to be paid as soon as administratively feasible after the Effective Date;] [(b) termination year discretionary bonus in the gross amount of [insert dollar amount], to be paid as soon as administratively feasible after the Effective Date;] [(c) state any other consideration].
Amounts the Company is paying in consideration for the Agreement will be treated as taxable compensation but are not intended by either party to be treated, and will not be treated, as compensation for purposes of eligibility or benefits under any benefit plan of the Company. The Company will apply standard tax and other applicable withholdings to payments made to you. Employee acknowledges this payment is in addition to anything Employee would have received had Employee not signed this agreement.
Full and Final Release: In exchange for the benefits provided by the Company under this Agreement, Employee fully and forever releases and discharges the Company, its parents, subsidiaries, affiliates and related entities and all of their respective agents, attorneys, employees, officers, directors, shareholders, members, managers, employee benefit plans and fiduciaries, insurers, successors and assigns (Released Parties) from any and all claims and potential claims that may be legally waived by private agreement, whether known or unknown, which employee has asserted or could assert against the Company arising out of, or relating in any way, to any acts, circumstances, facts, transactions or omissions based on facts occuring up to and including the date Employee signs this Agreement. Employee understands that Employee is releasing such Claims on behalf of Employee and all persons who could make Claims under, through or by Employee, such as a spouse, heirs, executors or assignees.
This releases includes, but is not limited to, (i) any and all Claims arising under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Civil Rights Act of 1991, the Age Discrimination in Employment Act (ADEA), the Family and Medical Leave Act (FMLA), the Employee Retirement Income Security Act (ERISA), the National Labor Relations Act (NLRA), the Pregnancy Discrimination Act, the Worker Adjustment and Retraining Notification (WARN) Act, the Americans with Disabilities Act (ADA), any amendments to such laws, any other federal, state or local constitution, charter, law, rule, ordinance, regulation or order [or those of any other county]; (ii) Claims in equity or under common law including, but not limited to, claims for tort, breach of contract (express or implied, written or oral), wrongful discharge, defamation, emotional distress and negligence.
- Non-Admission: This Agreement shall not be construed as an admission by the Company of any liability or acts of wrongdoing or unlawful conduct, nor shall it be considered to be evidence of such liability, wrongdoing or unlawful discrimination.
- Proprietary Information: Employee understands that Employee is required to return all confidential and proprietary information, computer hardware or software, files, paper, memoranda, correspondence, customer lists, financial data, credit cards, keys, tape recordings, pictures, security access cards and any other items of any nature that are the property of the Company, regardless of whether Employee signs this Agreement. The Company may choose to delay payment under this Agreement if Employee does not return all such information to the Company. Employee further agrees not to retain any tangible or electronic copies of any such property in your possession or under your control. To the fullest extent permitted by law, Employee also agrees to retain in confidence any confidential information known to Employee concerning the company until such information is publicly available.
- Confidentiality of Agreement: Employee agrees to maintain the confidentiality of this Agreement and will not disclose in any fashion the nature and terms of this Agreement and/or the substance or content of discussions involved in reaching this Agreement, except to Employee's lawyer, accountant, or immediate family or governmental agency without the prior written consent of an officer of the Company, except as necessary in any legal proceeding directly related to Employee's employment with the Company or provisions and terms of this Agreement, to prepare and file income tax forms, or as required by court order after reasonable notice to the Company; and provided that Employee instructs the recipient(s) of the information (with the exception of a governmental agency), and such individuals agree not to disclose the terms of this Agreement.
Cooperation: Employee agrees to cooperate with the Company relating to matters within the Employee's knowledge or responsibility. Without limiting this commitment, Employee agrees (i) to meet with the Company's representatives, its counsel, or other designees at mutually convenient times and places with respect to any items within the scope of this provision; (ii) to provide truthful testimony regarding the same to any court, agency or other adjudicatory body; (iii) to provide the Company with notice of contact by any non-governmental adverse party or such adverse party's representative, except as may be required by law.
The Company will reimburse Employee for reasonable expenses in connection with the cooperation described in this paragraph. This paragraph shall not require Employee to cooperate with the Company regarding any charge or litigation in which Employee is a charging or complaining party, or any confidential investigation by a government agency in which Employee is asked by such agency to maintain information in confidence.
- Non-Disparagement: Employee agrees not to make statements to clients, customers and suppliers of the Released Parties or to other members of the public that are in any way disparaging or negative towards the Released Parties or their products and services.
- Reference Inquiries. Employee will direct all reference inquiries to [Company representative name or department name] at [Contact information]. The Company will respond to all such reference requests by prospective employers by providing only dates of employment and job title.
- Applicable Law: This Agreement shall be interpreted under the law of the state in which Employee worked for the Company, without regard to conflicts of laws principles.
Complete Release: This Release constitutes the complete and total agreement between Employee and the Company with respect to issues addressed in this Agreement, except for obligations the Employee may have under any other Agreements with the Company regarding the non-disclosure of trade secrets and confidential or proprietary information, prohibiting solicitation of customers, suppliers or employees, prohibiting competition with the employer, assigning intellectual property or providing for a dispute resolution mechanism, contained in any agreements Employee has entered into with the Company under applicable law.
Employee represents that Employee is not relying on any other written or oral representations not fully expressed in this document. Employee agrees that this Agreement shall not be modified, altered or discharged except by written instrument signed by Employee and an authorized Company representative. The headings in this document are for reference only, and shall not in any way affect the meaning or interpretation of this Agreement.
- Severability: Employee agrees that should any part of this Agreement except the release of claims be found to be void or unenforceable by a court of competent jurisdiction, that determination will not affect the remainder of this Agreement.
- Use as Evidence: The parties agree that this Agreement may be used as evidence in a subsequent proceeding in which any of the Parties allege a breach of this Agreement or as a complete defense to any lawsuit brought by any party. Other than this exception, the Parties agree that this Agreement will not be introduced as evidence in any proceeding or in any lawsuit.
- Advice of Counsel: Employee acknowledges that Employee has read and fully understands the terms of this Agreement. The Company advises the Employee, in writing, to consult with an attorney of Employee's choice regarding the terms of this Agreement prior to signing this Agreement.
- Consideration Period: Employee understands that Employee has at least 21/45 days from the date Employee receives this Agreement and any attached information to consider the terms of this Agreement, including whether to sign this agreement (Consideration Period). Employee must not sign this agreement prior to the Termination Date. If Employee chooses to sign this Agreement before the Consideration Period ends, Employee represents that it is because Employee freely chose to do so after carefully considering its terms. Employee agrees with the company that any changes, whether material or immaterial, do not toll or restart the running of the Consideration Period. Employee agrees the Company has made no threats or promises to induce Employee to sign earlier.
- Revocation Period: Employee shall have seven calendar days from the date Employee signs this Agreement to revoke this Agreement by delivering a written notice of revocation to the same person to whom Employee returned this Agreement. If the Revocation Period expires on a weekend or holiday, Employee will have until the end of the next business day to revoke. This Agreement will become effective on the day after the end of the Revocation Period (Effective Date), provided Employee does not revoke this Agreement.
- Return of Signed Agreement: Employee is required to return your signed Agreement and any written revocation notice to [insert Company representative name]. [insert Mailing address/email address/telephone number].
- [APPLICABLE TO GROUP TERMINATION] Involuntary Reduction Program: If Employee is age 40 or over and the termination is part of an employment termination program, Employee acknowledges that the Company provided Employee with information about (a) the class, unit or group of individuals covered by the employment termination program; the eligibility factors for the program; and applicable time limits; and (b) the job titles and ages of all individuals eligible or selected for the program, as well as those in the same job classification or organizational unit who are not eligible or selected.
No Interference With Rights: Employee understands this Agreement does not apply to (i) claims for unemployment or workers' compensation benefits, after the date that Employee signs this Agreement, (ii) claims or rights that may arise after the date that Employee signs this Agreement, (iii) claims for reimbursement of expenses under the Company's expense reimbursement policies, (iv) any vested under the Company's ERISA-covered employee benefit plans as applicable on the date Employee signs this Agreement, and (v) any claims that controlling law clearly states may not be released by private agreement.
Moreover, nothing in this Agreement (including but not limited to the acknowledgments, release of claims, the confidentiality and non-disparagement obligations, cooperation and the return of property provision), (i) limits or affects Employee's right to challenge the validity of this Agreement under the ADEA or the Older Workers Benefit Protection Act (OWBPA), (ii) prevents Employee from communicating with, filing a charge or complaint with; providing documents or information voluntarily or in response to a subpoena or other information request to; or from participating in an investigation or proceeding conducted by the Equal Employment Opportunity Commission (EEOC), the National Labor Relations Board (NLRB), the Securities and Exchange Commission, the Occupational Safety and Health Administration, law enforcement, or any other federal, state or local agency charged with the enforcement of any laws, or from responding to a subpoena or discovery request in court litigation or arbitration (iii) precludes Employee from exercising your rights, if any, under Section 7 of the NLRA or under similar state law to engage in protected, concerted activity with other employees, including discussing Employee's compensation or terms and conditions of employment.
By signing this Agreement, Employee is waiving their right to recover any individual relief (including any backpay, front pay, reinstatement or other legal or equitable relief) in any charge, complaint, lawsuit or other proceeding brought by Employee, or on Employee's behalf by any third party, except for any right Employee may have to receive a payment or award from a government agency (and not the Company) for information provided to the government agency or where otherwise prohibited.
Notwithstanding Employee's confidentiality and non-disclosure obligations in this Agreement and otherwise, Employee understands that as provided by the Federal Defend Trade Secrets Act, Employee will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret made: (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of the law; or (2) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
Name Printed (From Company)
In exchange for severance and other promises contained in this Agreement, Employee is entering into this Agreement voluntarily, deliberately, and with all information needed to make an informed decision to enter into this Agreement. The Company has provided Employee with the opportunity to ask any questions regarding this Agreement, and provided notice of and an opportunity to retain an attorney, or Employee already is represented by an attorney.
Not valid if signed
Employee Name Printed
It is imperative that an employer consult with in-house or outside counsel regarding each particular situation before actually providing this agreement to an employee. This document is a contractual agreement, which binds an employer to the terms and conditions of the agreement.
In general, severance pay is not mandatory in Texas, unless there is a prior agreement, policy or statement that obligates employers to provide severance pay to a departing employee. However, severance pay in exchange for a release of claims by an employee may be an option for an employer in order to avoid litigation. Employers should be aware that some claims are not waivable (e.g., workers' compensation and unemployment claims), and they should not be included.
It is also considered good practice to conduct exit interviews with outgoing employees, whether they are resigning employees or terminated employees, as part of the separation process. In this interview, the employer can attempt to collect some valuable insight from employees before they leave the organization. This process is designed to create goodwill with an outgoing employee and may assist HR or the employer with the separation process.
Employers must ensure compliance with federal and state requirements for notices that must be provided at termination.
Limiting the method by which an employer may deliver the signed agreement or revocation is generally not recommended, because there may be an argument that doing so is not allowed by the Older Workers Benefit Protection Act (OWBPA).
Older Workers Benefit Protection Act (OWBPA). If an employer intends to enter into a separation agreement with an employee who is 40 years of age or older, then the separation agreement must be in compliance with the OWBPA. The OWBPA imposes specific requirements on employers regarding:
- The nature and quality of the agreement;
- The amount of time the employee should have to consider the agreement and/or review it with an attorney; and
- The types of claims that the employee is permitted to "waive" in exchange for severance.
Many subject matter experts recommend including OWBPA language and consideration/revocation periods regardless of the employee's age. Before removing the language, consider discussing with counsel.
Combining agreements. Employers should not combine this separation agreement with any other types of contractual agreements by and between employers and employees. It is important that employees consider separation agreements or any form of "termination" or "severance" agreement to be a privilege. In true at-will employment situations, severance pay is not required, meaning the employer provides it to the employee only as a chosen benefit or a contractual obligation.
Some employers combine separation agreements with arbitration agreement contracts, for example. This is not considered good practice because the employee should be made to acknowledge each of those agreements separately in order to give each their due weight and consideration under the law. Courts routinely invalidate separation agreements if they are too complicated or too broad in scope.
Equal Employment Opportunity Commission (EEOC) lawsuits. Further, employers should be aware that the EEOC has been challenging the waiver of the right to recover in an EEOC lawsuit.
Cooperation Clauses. Cooperation provisions are most commonly used in terminations of executive employees. Consider discussing with counsel the practicalities of enforcing such a provision.
#MeToo laws. This agreement contains an acknowledgment that the employee does not settle any claims relevant to applicable federal or state laws limiting confidentiality agreements (known as #MeToo laws).
If the employee is settling a claim of unlawful discrimination; harassment; sexual harassment; abuse; assault; or other unlawful employment practices or criminal conduct, or retaliation against the employer or any of the Released Parties, this representation should be removed and the company has two options: (1) If the employer needs a confidentiality provision, leave it in the agreement but the employer cannot deduct the severance payment on its taxes; or (2) if the company does not need a confidentiality provision, remove the confidentiality provision and deduct the severance payment on its taxes.
It may be possible to allocate some of the consideration depending on the circumstance to settlement of the sexual harassment claim which would make that part of the consideration non-deductible if a confidentiality clause is needed.
Applicable Law. If changing the applicable law to a different state than Texas, consider discussing the ramifications with counsel. Also, depending upon your jurisdiction, you may want to consider including a forum selection provision specifying the county of choice for any subsequent actions. Note, however, that forum selection provisions tend to be more enforceable for higher level employees.