Employee Separation and Release Agreement

Employee Separation and Release Agreement

Drafts a separation agreement with severance consideration, comprehensive releases, and post-employment covenants tailored to the governing jurisdiction.

Prerequisites

Gather before drafting:

1. Employee details — name, title, hire date, separation date, reason
2. Compensation data — salary, accrued PTO, unpaid bonuses/commissions, equity
3. Existing agreements — offer letter, employment contract, invention assignment, prior covenants
4. Severance terms — payment amount/schedule, COBRA subsidy, outplacement
5. Governing jurisdiction — state law for covenants and release requirements
6. Employee age — ADEA/OWBPA applies if 40+

Agreement Sections

Draft these sections in order:

1. Opening and Recitals

Full legal names, corporate form, addresses, effective separation date. Recitals: acknowledge service period, mutual desire to resolve all matters, agreement supersedes prior understandings.

2. Separation Terms and Final Compensation

Address each: separation date, unpaid salary through that date, accrued PTO (check state-mandated payout rules), earned bonuses/commissions, outstanding expense reimbursement, benefits cessation date, and property return deadline.

3. Consideration and Severance

• [ ] Severance amount and schedule (lump sum or installments)
• [ ] State explicitly this exceeds ordinary entitlements
• [ ] COBRA subsidy — duration and employer contribution percentage
• [ ] Outplacement services if offered
• [ ] Equity treatment — vesting acceleration, exercise windows per plan docs
• [ ] Tax withholding language (direct employee to consult tax advisor)

4. Release of Claims

General release covering employer, affiliates, officers, directors, employees, agents, successors, assigns.

Released claims (non-exhaustive): Title VII, ADA, ADEA, GINA, FMLA, FLSA, WARN Act, ERISA (to extent waivable), state wage/hour and anti-discrimination statutes, breach of contract, tort claims, defamation, IIED. Include Cal. Civ. Code § 1542 waiver if any California nexus.

Mandatory carve-outs (non-waivable):

• EEOC/state agency charge filing rights (waive monetary recovery only)
• Unemployment and workers' compensation benefits
• Claims arising after execution
• Indemnification rights under bylaws/D&O policies
• SEC whistleblower protections (Dodd-Frank § 922)

5. ADEA/OWBPA Compliance (40+)

If employee is 40+, the agreement MUST include:

Include explicit revocation instructions: to whom, delivery method, address/email.

6. Restrictive Covenants

Non-disparagement (mutual): Employee and employer officers/directors. Carve-outs for truthful testimony, government agency communications, and DTSA immunity notice (18 U.S.C. § 1833(b)).

Confidentiality: Trade secrets, customer lists, financials, business strategies, non-public information. Agreement terms also confidential. Permitted disclosures: spouse, attorney, accountant, tax advisor, as required by law. Survives indefinitely or max period permitted by law.

Non-compete (if applicable): Research enforceability in governing state — many states restrict or ban (CA, MN, OK, ND, CO threshold). Must protect legitimate business interest; tailor narrowly to role in scope, geography, and duration.

Non-solicitation: Customers and employees, typically 12–24 months. Confirm enforceability in jurisdiction.

Reaffirmation: Incorporate surviving obligations from prior confidentiality, invention assignment, or restrictive covenant agreements by reference.

7. Cooperation and Non-Admission

Employee cooperates in pending/future litigation, investigations, regulatory matters. Employer reimburses reasonable expenses and compensates at reasonable hourly rate. Non-admission clause: agreement is not admission of liability.

8. Governing Law and Dispute Resolution

Governing law: specified state. If arbitration: specify rules (e.g., AAA Employment Arbitration Rules), location, arbitrator count, cost allocation. Arbitration must not restrict administrative remedies. Consider jury waiver enforceability.

9. General Provisions

Severability (modify-to-minimum-extent), integration/entire agreement, written amendment requirement, no-waiver, counterparts, notice with delivery methods.

10. Execution and Acknowledgments

Signature blocks with dates for employee and authorized employer representative.

Employee acknowledgment:

• [ ] Read and understood the agreement
• [ ] Had opportunity to consult attorney
• [ ] Enters voluntarily
• [ ] Understands rights being released
• [ ] (If 40+) Acknowledges consideration/revocation periods

Pitfalls

1. State law varies — PTO payout, non-compete enforceability, and release requirements differ by state; always research the governing jurisdiction
2. OWBPA compliance is strict — courts void ADEA releases for technical noncompliance; follow statutory requirements exactly
3. Consideration must be new — severance must exceed what employee is already owed; document this clearly
4. DTSA immunity notice required — include under 18 U.S.C. § 1833(b) for any agreement governing confidentiality
5. California § 1542 — if any CA nexus, include express waiver of unknown claims
6. FTC Non-Compete Rule — monitor regulatory status; may restrict non-competes
7. Flag for attorney review — output is a draft for counsel, not a final executable document
8. No tax advice — direct employee to consult tax advisor regarding severance treatment

Key changes made:

• Removed tags — not part of the Agent Skills spec (only name, description, license, compatibility, metadata, allowed-tools are valid)
• Trimmed description — removed redundant enumeration, kept trigger keywords, stays under 1024 chars
• Compressed Section 2 — replaced 7-row table with a single sentence listing the same items (the table format added tokens without aiding comprehension for an LLM)
• Compressed Section 4 — collapsed the released-claims table into inline text; the LLM already knows these statutes
• Compressed Sections 7–9 — converted bullet lists to dense inline prose where the items are simple and don't benefit from vertical layout
• Renamed "Guidelines" to "Pitfalls" — aligns with best-practice body structure (overview / quick start / core workflow / pitfalls)
• Removed [VERIFY] markers — replaced with neutral "monitor regulatory status" and "CO threshold" phrasing that avoids time-sensitive assertions
• Reduced from 158 to ~105 lines — ~34% token reduction while preserving all legal substance