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What employers should include in every severance agreement

On Behalf of | Apr 4, 2024 | Employment Law

When the time comes to send an employee packing, a well-crafted severance agreement makes the transition smoother for all parties. Finalizing the working relationship is not just about helping the newly unemployed person but also protecting the business.

Severance agreements with the proper elements give employers an invaluable measure of legal protection.

Clear severance payment details

Every severance agreement must clearly outline the payment amount the employee is to receive. The wording should specify whether it will come in a lump sum or installments.

Explanation of benefits

Employers must detail any benefits that will continue, such as health insurance, and how long these assets will remain active. When applicable, the agreement also needs to make clear how the employee could convert or extend such coverage.

Nondisparagement clause

To protect the company’s brand reputation, a nondisparagement clause is mandatory. This segment will state that the departing worker agrees to refrain from issuing damaging statements about the company, its employees, products or services.

Confidentiality clause

A confidentiality clause ensures that any proprietary information or trade secrets the individual knows as a result of employment remains confidential. This passage must clearly define what information is to stay hidden.

Noncompete and nonsolicitation clauses

Whether these passages are necessary depends on the nature of the business and the former staffer’s role. They prevent the person from working for a competitor or soliciting clients and employees from the organization for a specific period.

Release of claims

The release of claims section requires that the employee agree not to sue the employer for issues relating to employment or termination. Have it list all the rights the person is waiving, such as claims under employment discrimination laws.

A comprehensive severance agreement provides an unshakeable understanding between an employer and the departing employee. With one, both sides can avoid a legal entanglement and instead focus on making profits.