Toll Free: 877.880.

4477
Phone: 281.880.6525

Employment
Separation
Agreements May
Provide Peace
of Mind

www.hrp.net
Having an employee sign a separation agreement upon ending the
employment relationship amounts to a form of insurance that he or she will
not later take legal action against your company, based on the termination.
Whether a separation was friendly (for example, due only to a reorganization
or downsizing), or unfriendly, an agreement could prove worthwhile.

Suppose your company downsized. After a few weeks of unemployment, even

an ex-employee who seemed understanding during the termination process
may conjure up reasons why a court may see the downsizing as unjust.
There's a raft of possible claims ex-employees could make if the goal is just to
get you to settle instead of paying the costs to fight the case.

Employees aren't obliged to sign such agreements, but can be motivated to do

so by, for example, a lump-sum payout or agreement to pay the employer
share of the person's health care benefits for a fixed period of time.

www.hrp.net
 Bases for Litigation
Here's a partial list of claims for which an ex-employee might decide to sue
your company, even if from your perspective, the claims lack merit:

Discrimination. In addition to the familiar discrimination categories

banned by the U.S. Civil Rights Act (age, sex, race, color, national origin,
religion, pregnancy, disability and veteran status), several states have
added categories such as marital status, arrest record and sexual
orientation.

Breach of covenant of good faith and fair dealing. Proving this would be a
steep uphill climb in most jurisdictions, but a former employee might get
it to stick.

www.hrp.net
 Termination in violation of public policy. Although unusual, cases have
been brought in which employees claim they were fired for doing things
that created problems for the employer, but nevertheless were consistent
with their states' policies with regard to that issue. Examples might
include preventing environmental damage and even cruelty to animals.

Breach of contract. This is only applicable if the employee had an

employment contract to begin with that didn't clearly address all
termination scenarios.

The most fundamental provision of a separation agreement requires the

employee to release you from any future legal claims. Another key component
is an anti disparagement clause, prohibiting the employee from bad-mouthing
you publicly. This should be reciprocal, however, barring you from doing the
same, to balance it out.

www.hrp.net
 Agreement Provisions
The agreement should also require that:
Confidentiality is maintained with respect to the agreement, except when
the communication is with the employee's spouse, accountant or
attorney,

Company-owned property in the possession of the employee is returned,

The employer won't attempt to block the departing employee from

seeking unemployment compensation,

The employee will be paid for any as yet unpaid, accrued compensation,
such as bonuses or commissions, net of any employee debts to you such
as having taken excessive vacation days, and

The employee receives a description of the compensation you're offering

him or her (if any), as an inducement to sign the agreement.

www.hrp.net
Another provision to consider is one stating that the employee cannot be
rehired. On one hand, you might prefer to keep your options open by not
including such a provision particularly if the individual was a good worker.
On the other hand, this provision makes it crystal clear that the termination is
final, and that there can be no hint that you have implied any promises to the
contrary.

As noted earlier, employees are under no obligation to sign these agreements,

nor is your company obligated to offer similar agreements to other
employees.

www.hrp.net
 What's It Worth?
An employee might refuse to sign an agreement, even when a financial
reward for doing so is on the table. In that case, you'll just need to decide
whether to raise your offer or drop it altogether. One way to encourage a swift
resolution of the matter is to put a time limit on your offer, so the employee
cannot allow the process to drag out.

www.hrp.net
However, if the employee is at least 40 years old, be aware that the Older
Workers Benefit Protection Act requires your company to give him or her time
to decide on a course of action. That is, you must allow at least 21 days to sign
or not sign, and then another seven days to rescind a decision to accept the
agreement.

An employee's reluctance to sign a separation agreement could be an

indication that he or she is mulling the possibility of pursuing a legal claim.
Still, if you're confident there's no possible valid claim, you may not want to
succumb to what could be a veiled threat.

www.hrp.net
 Simplicity Is Best
It's advisable to keep agreements as short as possible. For example, if you
incorporate other provisions such as prohibiting the employee from going to
work for a competitor, that could create issues because non-compete
agreements are generally hard to enforce. In California, non-competes are
banned altogether.

For the same reason, be sure to have a labor attorney review a prospective
agreement for enforceability before presenting it to a departing employee.
Keep in mind that, though you can find fill-in-the-blank separation agreements
online, they might not be fully enforceable in your state. State requirements
vary and are sometimes stricter than federal requirements.

www.hrp.net
14550 Torrey Chase Blvd., Ste. 360 Houston, TX 77014 USA
Toll Free : 877.880.4477
Phone : 281.880.6525
Fax : 281.866.9426

E-mail : info@hrp.net

www.hrp.net