Positions in the workplace don’t last forever. Terminations happen, and it’s not always an enjoyable conversation to have on either end. Reasons for termination could be due to downsizing, reorganization or resignation. Regardless of the reason, a separation agreement is essential.
Employee separation agreements are documents that outline the terms of termination between an employer and employee. The employee signs the agreement, and it waives their right to sue for wrongful termination. It’s important for employers to utilize these documents in case the employee seeks additional severance pay.
What is in a separation agreement?
There are usually two parts to an employee separation agreement.
First, the employee will sign a general waiver. This waiver covers any claims that the employee could use against the employer. Common claims may include employment law claims, compensation claims and employment discrimination claims.
Secondly, the employer pays the employee a fee for waiving the claims. This is different from a severance package, which is sometimes optional in separation agreements.
In addition, the agreement can contain other clauses that protect the business, such as:
- Non-compete provisions
- Non-disparagement
- Confidentially/non-disclosure
- Tax and insurance
- Rehiring policy
- References
- Post-employment cooperation
Covering the essentials
A good employment separation agreement benefits both the employer and the employee. The employer is protected against employee lawsuits, while it protects the employee’s right to fair termination and severance pay. In continuation, it should cover present and future actions, and reasons for termination. It also must follow Colorado labor laws.
Employers and employees should carefully go over the agreement before anything is signed. Employers should make sure their company handbooks and policies are up-to-date. Employees might use that material for references. If either party questions any aspects of the agreement, it’s important to seek advice from an attorney experienced in employment law.