Severance Agreement and General Release

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Severance Agreement and General Release

What Is Severance Agreement and General Release?

A severance package is a payment through an employer towards an employee at the time of the employee’s termination. It is generally given in exchange for a written promise from the employee that they would not file a lawsuit against the company. This written promise is commonly termed a severance agreement

A general release is an agreement not to sue; it waives the right of an employee to sue the employer and “releases” employer from legal liability for claims the employee might have against it.

When Do You Need a Severance Agreement and General Release?

Many employees don’t have a legal right to receive a severance package when their service is terminated. However, because severance agreements could help reduce an employer’s legal liability, several corporations offering severance packages irrespective of whether they are expected to do so.

The general release provision is where the company asks the employee to waive all legal claims employees believe in having against the company. The language and scope of general release provisions vary greatly. Many agreements state the scope of this clause’s coverage to contain only those claims arising out of the employment relationship and termination. A general release doesn’t usually cover claims that might arise after an employee sign the agreement.

Purpose of Severance Agreement and General Release

What the former company is offering the employee? probably severance pay, health-care coverage, or a continuation of the employee’s benefits, as opposed to what the employee agrees to give up, that is any legal claims employees might have against your former company arising from the employment or the termination.

Some companies choose to pay severance as they want something in return: the employee’s agreement comprises not to sue the employer. Such an agreement is generally called a release. In exchange for receiving a severance package, the employee waives the right to sue the employer for the legal claims indicated in the release.

Key Terms of Severance Agreement and General Release

The key terms of a severance agreement and general release should contain are;

  • Vacation and sick pay
  • Severance pay terms
  • COBRA (benefits) information
  • Return of employer property- that is, work phone, laptop, etc.
  • Non-compete clause
  • Confidentiality agreement
  • Your rights to a bonus
  • Stock information agreement
  • Business expense repayment
  • General release and covenant not to sue

Inclusions in a Severance Agreement and General Release

Parties involved: In the creation of this agreement, there are usually two parties involved; the first being employer/company and the second is the employee.

Effective dates: This agreement would state the date when the agreement starts and when the agreement will expire, if applicable

Where does it apply: Severance agreement is a legally binding contract between private parties and are governed by California contract law.

Drafting a Severance Agreement and General Release

The claims for civil violations and not crimes could be legally waived in a severance agreement. Although it is possible that many legal rights could be waived, these are the most commonly stated in severance agreements:

  • The capability to sue for wrongful termination, harassment, or defamation.
  • The capability to sue for unlawful discrimination on the basis of the employee’s gender, race, sex, age, religion, sexual orientation, etc.
  • The right to discuss the terms and conditions of the severance agreement or additional matters with third parties (a confidentiality provision).
  • The right to discuss the company’s trade secrets.
  • The right to say negative things about the company (a non-disparagement provision).
  • The capability to openly discuss the situation leading up to the employee’s termination.
  • The capability to sue for other known as well as unknown claims.

However, there are many additional issues a company might ask for employees to waive the right to sue the employer for the legal claims indicated in the release.

[Also Read: Severance Benefit Plan]

Benefits of Severance Agreement and General Release

The two primary provisions form the basis of an employee’s severance agreement is that an employee’s severance pay and the general release an employee agree to. Whatever severance agreement an employee received or would like to negotiate comprises several other meaty provisions, but these “Big Two” would greatly influence whether an employee signs the agreement, discard it, or go for negotiation for better terms.

In a general release, there are few opportunities to seek some legal recourse against your former company, reliant on the type of claim the employee wishes to bring, the remedy the employee seeks, or the time when the underlying event occurred.

Types of Severance Agreement and General Release

The severance package might include some of the following:

  • Any additional payment depending on months of service
  • Payment for unused accrued PTO vacation time Holiday pay or sick leave.
  • A payment in lieu of a requisite notice period.
  • Medical, dental or life insurance
  • Retirement accounts benefits
  • Stock options
  • Help in searching for new work, for example, access to employment services or assist in producing a resume.

General release claims also include, but are not limited to:

  • Employment law claims;
  • Compensation claims;
  • Employment discrimination claims; and
  • All interest, attorney fees, and costs claims

What Happens When You Violate The Severance Agreement and General Release?

If an employer has contractually agreed to pay severance, it should honor that promise. Otherwise, the employee could sue for breach of contract

Sample for Severance Agreement and General Release

A sample of the agreement can be downloaded from below.

Download Severance Agreement and General Release Template

Severance Agreement and General Release


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