Summary
A Separation and Release Agreement is a contract between the “Company and a departing employee. A Separation and Release Agreement minimizes the threat of litigation against the Company and protects the Company’s goodwill.
Instructions to Employers
- Negotiate and sign a Separation and Release Agreement with all Vice Presidents and C-Level Officers that separate from the Company (i.e., terminate their employment agreement for any reason).
- Negotiate and sign a Separation and Release Agreement with any employees that are high risk for (i) threatening litigation against the Company, or (ii) disparaging the Company on social media.
Consideration
A Separation and Release Agreement must include consideration in order for the Agreement to be legally binding and enforceable. Consideration can be a promise, performance, forbearance, or property with legal value. Generally, consideration in a Separation and Release Agreement is cash (e.g., $10,000 or four weeks of base salary).
Consideration – Termination Without Cause
The Company’s standard employment agreements usually allow the Company or the employee to terminate the employment agreement without cause upon delivery of 90 days’ notice. I recommend that the Company (i) offer to pay the employee a fixed cash amount (e.g., $10,000) as consideration for signing a Separation and Release Agreement; (ii) offer to pay the employee 90 days of salary and waive the 90 day notice requirement as consideration for signing a Separation and Release Agreement; (iii) offer to waive the 90 day notice requirement as consideration for signing a Separation and Release Agreement; or (iv) offer to waive other obligations of the employment agreement as consideration for signing a Separation and Release Agreement.
Surviving Obligations
The Company’s standard employment agreements should have surviving obligations against the employee, including non-solicitation, confidentiality, and non-disparagement.
If the employee did not sign a standard employment-contractor agreement, then a Separation and Release Agreement can include the same surviving obligations against the employee-contractor.
