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Understanding your separation agreement

There are many reasons for a separation agreement (sometimes called a severance agreement). Separation agreements are a contract that is drafted when a company gets rid of a position – whether through reorganization, downsizing or other reasons. For those on the receiving end, it’s a stressful and often painful discussion that ends with a packet of material to read and sign.

In the big picture, the agreement defines how the upcoming separation will happen, including through a period of transition. It includes schedules and dates, terms for severance pay, confidentiality and non-compete clauses. The goal is to protect the company from future harm and to establish a clean break for the employee.

What the employer wants

By offering a separation agreement, the employer is looking to conclude the relationship without future claims. This means more than a defined schedule of events. It means wrapping up any potential liabilities, including lawsuits related to termination, payment or employment practices. It will also include a plan for an employee’s knowledge of company information. Non-compete clauses are common, as are statements on confidential material and if the ex-employee can talk publicly about the organization. An employee may be asked to give up certain rights in signing the contact.

What the employee wants

Employees seek peace of mind about their career transition. In addition to dates and monetary details, employees should have a clear understanding of benefits and insurance issues, vacation or PTO buyouts, and conditions for when the employee gets a new job. Common issues arise if an employee is rehired by the same company, in making unemployment claims, and in knowing what language to use about their former position.

Mutual satisfaction

With the loss of a job and uncertainty about the future, many employees feel powerless when presented with a separation agreement. The goal is to bring both parties together, to reach the agreement implied by the document’s name.

Employees should reference company handbooks and policies, especially in reference to the reason given for termination. Other points of interest include stipulations about severance payments: when they apply, what happens upon finding new employment and what happens to employee benefits through the transition. Because employers seek to wrap-up the relationship, it’s likely that there are concessions about what an employee can (or cannot) do in the aftermath of a separation agreement. Anyone facing job termination can consult with an employment attorney for a better understanding and closer look at your separation agreement to make sure it fits your needs without sacrificing important rights.

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