It happens everyday. Employees are let go for poor performance or lack of work. After the decision to terminate has been made, employers must consider whether to offer the employee additional pay or benefits in exchange for a release by the employee of all claims he or she may have against the employer.
A separation and release agreement is simply the contract used to document the understandings reached by the parties. In addition to the severance payment and release, the employer might agree to provide a neutral reference or outplacement services for the employee. The agreement might also contain an agreement by the employee avoid working for a competitor for a period of time.
When should an employer consider a separation and release agreement? The following situations are typical: