What is a "separation agreement"?

A separation agreement is a written contract that sets out the terms of an employee’s separation of employment.  A separation agreement will usually include a release of claims against the company by the separated employee in exchange for the payment of money to the employee by the employer.  This payment is commonly referred to as separation pay, severance, or a settlement payment.  There are many important non-monetary terms and conditions commonly contained in a separation agreement. 

Separation Agreements from the Employer’s Perspective

From the employer’s perspective, some key provisions of a separation agreement include:

(1)  A release and waiver by the employee of all claims against the employer;

(2)  The withdrawal of all pending claims, charges or lawsuits against the employer by the employee;

(3)  An agreement for the employee to not sue or bring any claims against the employer;

(4)  A confidentiality provision requiring the employee to not disclose the terms or fact of the separation agreement;

(5)  An affirmation of the employee’s obligation to not disclose confidential or proprietary company information;

(6)  A non-disparagement clause, in which the employee agrees to not make any disparaging statements against the company;

(7)  A clause setting out the employer’s remedies in the event the employee breaches the separation agreement, such as the recovery of the employer’s attorneys’ fees and litigation costs from the employee in the event of litigation; and

(8)  An agreement that the employee will not seek reemployment with the employer.

Separation Agreements from the Employee’s Perspective

From the employee’s perspective, some key provisions of a separation agreement include:

(1)  The payment of the separation, severance, or settlement amount;

(2)  The payment of all outstanding compensation and benefits due;

(3)  A neutral reference clause, in which the employer agrees to only release dates of employment and positions held to prospective employers, and to not release any other information about the employee’s employment or separation of employment;

(4)  A non-disparagement clause, in which the employer agrees to not make any disparaging statements about the employee;

(5)  An agreement from the employer to not oppose any claim by the employee for unemployment insurance benefits;

(6)  A release by the employer of all claims against the employee;

(7)  An agreement by the employer to not sue or bring any claims against the employee; and

(8)  A pre-written, pre-signed positive letter of reference on the employer’s stationary, attached to the separation agreement.