An employment separation agreement is a contract by which an employee and employer agree to end their working relationship (it can be initiated by either party). For instance, this type of agreement is more common when an employee is laid off (rather than fired) or chooses to resign. As opposed to a termination letter, which may cast a negative impression of the employee, a mutual arrangement is less damaging to their professional reputation. Other reasons for employment separation include employee injury or illness, employer lack of funds or work, and employee wrongdoing. The separation agreement must state the employee’s termination date and that the employer is up to date with all current payments due. If the employee will be given any severance pay, the amount and manner of payment will also need to be addressed in the form. The calculation of the severance is often included in a prior employment or severance contract. Any company property that the employee needs to return should also be put into writing to ensure its return. In addition to any existing non-disclosure agreement (NDA) that the employee may have with the employer, the employer may include a non-compete clause in the agreement which places restrictions on the employee’s ability to compete against the employer’s business. The contract must be signed by both parties to become legally binding.

What is Severance?

Severance is when an employer has agreed to pay their employees a cash amount following their termination, usually in proportion to the duration of their employment. The severance package is either paid out all at once or at regular intervals over a period of time. In accordance with the Fair Labor Standards Act (FLSA), there are no legal requirements for severance pay. Instead, it is a matter that must be negotiated and agreed upon between the employer and their employees. As such, employers are legally bound to any written agreement in which a severance plan is promised.

How to Write an Employment Separation Agreement

Download: Adobe PDF, Microsoft Word (.docx)

Step 1