Severance agreements are a vital part of every company’s Employment Law Toolkit. Executives should not download templates or use previous agreements without understanding the legal requirements and the company’s goals. The agreement has to effectively release claims which a former employee may assert against the company. In addition, the agreement should address a number of other issues the company may want to resolve. Without addressing these issues and having an employee sign an effective release of claims, the agreement is “not worth the paper it’s written on.”
It’s easy to draft a severance agreement. Just use the one your lawyer sent you last year and change the name and amount of severance. Or, Google “severance agreement” and use the template on the Internet.
The question is not whether and how quickly a human resource professional, CFO or CEO is able to prepare the agreement. The question is whether the agreement is enforceable, avoids litigation and fulfills the company’s goals. If not, the company just gave the former employee just enough money to engage an attorney on retainer and fund a lawsuit. A former employee might well sign the unenforceable agreement and turn around and file suit.
What are the challenges, the company’s goals, and the language that will protect the company?
Downloading a template for the Internet is not the answer. Instead, by understanding and applying the correct language, the agreement will effectively release claims and avoid litigation. Just as importantly, the correct language will meet the company’s myriad goals.
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