Prepare a Severance or Termination Agreement

Key Points

  • When an employee leaves the organization for any reason, the employer can create a mostly clean and permanent break by using severance or termination agreements. These agreements involve an exchange of consideration - something of value - between the employer and the employee and should be crafted in a way to ensure they remain enforceable after the fact.
  • Enforceability of a severance or termination agreement will often turn on whether the agreement is fair - that is, whether the exchange of consideration seems equitable and reasonable. Both state and federal courts may consider other factors as well, including the employee's education and ability to fully understand the agreement, whether the employee had an opportunity to consult with counsel before signing the agreement, whether the restrictions imposed on the employee after termination are reasonable and whether the agreement complies with any applicable legislation.
  • When crafting severance or termination agreements, HR professionals should be sure to consider guidance both from the National Labor Relations Board (NLRB) and the Equal Employment Opportunity Commission (EEOC). The NLRB may bring action against employers for imposing severe or unreasonable restrictions on an employee's ability to discuss the severance agreement with other employees, while the EEOC may sue an employer if it requires an employee to give up his or her right to file administrative claims with the EEOC.

XpertHR Resources