What Is a Separation Agreement?

If you plan to let go of an employee, little pomp and circumstance is actually required. You simply inform the employee that they are no longer employed by your company and pay whatever wages they are still owed for work performed. You might or might not wish to give them advance notice, but you have no further legal obligations. If they were subject to an employment contract, you might need to demonstrate that you complied with the terms of the contract (such as by providing justification for the termination or providing severance pay) and provide written notice of termination. Depending on the nature of the termination, such as if the employer is engaging in mass layoffs, the employer might have additional obligations.

However, it’s often wise to make additional efforts when terminating an employee. Employees may have inside corporate information you wish to protect, they may be guaranteed certain benefits pursuant to their contract, you may have concerns about their working for a competitor or potential claims they may have against the company, etc. Whether they are leaving voluntarily or being let go, it may be in everyone’s interest to draft a separation agreement. Continue reading to learn about separation agreements, and if you are dealing with employment law or other business law matters in the Chicago area, call an experienced Illinois severance agreement lawyer for advice and assistance.

Separation and Severance Agreements

A separation agreement, commonly called a severance agreement, is a contract that lays out the terms of an employee’s separation from their employer. The document dictates the terms on which the employment relationship will end, typically including severance pay/benefits for the employee in exchange for a release of liability for any actual or potential legal claims the employee may have against the employer. Separation agreements are not required every time an employee leaves a company, but they may be required under the terms of an employment contract, company policy, or statute applying to specific circumstances.

Severance agreements can include a number of additional provisions designed to protect the employee or employer. Separation agreements can protect employers from liability, enhance their goodwill and reputation (especially in the face of office closures or heavy layoffs), and otherwise protect the interests of all parties. A separation agreement can even be used to resolve a dispute with an employee to prevent litigation.

Common Separation Agreement Terms

Separation/severance agreements grant departing employees money and/or other benefits in exchange for a defined benefit to the employer. Employers cannot, for example, simply force employees to waive their right to back pay and other benefits due without providing something in return. The former employee is typically given severance pay in exchange for agreeing to adhere to certain obligations and waive certain rights.

The benefits to an employer included in a severance agreement may include, for example:

• Employee’s waiver of legal claims against the employer, including wrongful termination, wage & hour claims, or wrongful withholding of pay;
• Non-disparagement agreement preventing the employee from publicly speaking out against the employer;
• Non-compete agreement preventing the employee from working for a competitor of the employee or otherwise directly competing, within reason;
• Non-disclosure agreement preventing the employee from disclosing any important, non-public information learned during the course of their employment;
• Non-solicitation agreement preventing the employee from soliciting the employer’s customers or other employees

It is important to note that a separation or severance agreement should not include terms prohibiting workers from engaging in protected activity.

An experienced business law attorney can assist you in drafting a separation agreement that addresses all of your needs and concerns, tailored to the specific employee and the circumstances of their departure.

Call an Experienced Severance Agreement Lawyer for Help With Employment Law Concerns

If you are an employer preparing a severance agreement for a departing worker, or an employee presented with a separation agreement to review, you could benefit from educated legal counsel. Contact an experienced, knowledgeable employment law attorney at MacDonald, Lee & Senechalle, Ltd. for a consultation, in Hoffman Estates at 847-310-0025, or in Des Plaines at 847-298-5030.