When the time comes to fire an employee, a company must do everything in its power to protect itself from litigation. Even if your human resources department has piles of documents outlining poor performance, complaints, and other issues with an employee; it is still beneficial to have a separation agreement in place to protect the interests of the company when firing an employee. Even with a strongly written separation agreement, your employees are not obligated to sign, which can leave your company open to litigation.

What to Include in a Separation Agreement

Any separation agreement written for your company should include the following items:

  • The terms the employee will agree to when signing the document
  • The amount of severance pay the employee will receive
  • A provision that ensures the agreement will be kept confidential outside of attorneys, accountants, or spouses
  • A mutual clause that prevents both parties from disparaging each other
  • A clause that requires the employee to return all company property
  • A clause that states the employer will not oppose a claim of unemployment by the employee
  • A provision that prevents the re-hiring of the employee for a different position, or even the same position within the company
  • A merger clause that expressly states that this document is the full and final separation agreement between the employer and the employee
  • Provide the required 21 days for an employee 40 or older to review and sign the document or then change their mind seven days later, according to the Older Workers Benefit Protection Act

Additional clauses can be included in the separation agreement that covers special compensation should the employer owe the employee deferred compensation or commissions. At the same time, a clause can be added if the employee owes the employer excessive vacation time or costs related to training.

Why Your Company Needs a Separation Agreement

Separation agreements are completely optional for companies of all sizes. They help reduce the risk associated with terminating the contract of an employee for any reason, especially if you have reason to believe the employee will cause trouble once they are fired. Should your company decide to utilize separation agreements it will assume no additional risk in its operations. Companies most often use separation agreements when going through mass layoffs. Other companies use these agreements each time they relieve an employee of his or her duties. Almost all separation agreements come with severance pay in an effort to release all claims that the employee could make against the company. Your business is well within its rights to withhold severance pay until the employee decides to sign the separation agreement.

Protected Classes

Massachusetts and federal law specify various protected classes when it comes to employment and termination. This means that you cannot discriminate in your hiring or firing practices because of age, race, sex, religion, disability, national origin, or sexual orientation. It is also in your company’s best interest to inform the employee who is the subject of the separation agreement that they can consult an attorney of their own. Have an attorney review your separation agreement to ensure that no protected classes are being discriminated against in the agreement.

Mediation a Viable Option for Separation Agreements

Employees are not required to sign separation agreements written by their employers. It’s simply an additional document that helps reduce the risk the company experiences when firing an employee. If an employee refuses to sign the agreement, it doesn’t necessarily mean he or she will file a lawsuit against your business. 

If you are concerned that an employee will not sign the separation agreement you have written, it might be time to consider mediation as an option to resolve the situation amicably. Mediation can be used to secure an agreement between your company and the employee. The agreement reached could be an edited version of the separation agreement or it could be other terms reached at the negotiating table. 

Consult an Experienced Mediator Today

Operating a business is not easy, especially when the time comes to relieve an employee from their contract. It is in your company’s best interest to have a separation agreement in place that you can present an employee when firing them. This agreement should be written with the assistance of a business law attorney to ensure that your company is protected as much as possible. If necessary, you can mediate the dissolution of the employment agreement with the help of an experienced mediator. Call the office of Shapiro Mediation Services at (339) 298-7733 to schedule a consultation today.


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