What Does Severance Agreement Mean

A severance agreement, also known as a separation agreement, is a legally binding document that outlines the terms and conditions of an employee`s departure from their job. It`s an agreement between the employer and employee that usually includes financial compensation and benefits in exchange for the employee`s agreement not to sue the company or speak negatively about it.

A severance agreement may be offered to an employee if they are laid off, terminated, or resign under certain circumstances. It`s commonly offered to executives, managers, and employees who have been with the company for a long time.

The main purpose of a severance agreement is to provide financial security to an employee who is leaving the company. The agreement may include a lump sum payment, continuation of benefits, and outplacement services to help the employee find a new job.

In exchange for these benefits, the employee agrees to certain conditions, such as not disclosing confidential information about the company, not suing or disparaging the company, and complying with non-compete and non-solicitation clauses.

Severance agreements may also include provisions that protect the employer`s interests, such as a release of claims, indemnification, and a confidentiality agreement. These provisions are designed to protect the company from potential lawsuits and to ensure that the departing employee doesn`t disclose sensitive information.

Severance agreements are often negotiable, and employees are advised to consult with an attorney before signing the agreement. An attorney can help review the terms of the agreement and negotiate better compensation or more favorable terms.

In summary, a severance agreement is a legal document that provides financial compensation and benefits to an employee who is leaving a company. It`s an agreement between the employer and employee that includes conditions and provisions that protect both parties` interests. Employees should consult with an attorney to review and negotiate the terms of the agreement before signing.