What is a Severance Agreement, and How Does It Work?

Mar 31, 2023 | Tips on Contracts

A severance agreement is a legally binding document between an employer and an employee that outlines the terms and conditions of the employee’s departure from the company. This agreement typically comes into play when an employee is terminated or laid off from their job.

The purpose of a severance agreement is to provide the employee with certain benefits – such as financial compensation or continued access to health insurance – in exchange for their agreement to waive any legal claims against the employer. In other words, the employer agrees to provide the employee with certain benefits in exchange for the employee agreeing not to sue the company for wrongful termination or other legal claims.

Severance Agreement Terms & Provisions

The terms of a severance agreement can vary widely, depending on the circumstances of the employee’s departure and the company’s policies.

Some common provisions that may be included in a severance agreement include:

  • The amount of severance pay the employee will receive, if any
  • The length of time the employee will be eligible to receive continued health insurance coverage
  • A non-disclosure clause that prohibits the employee from sharing confidential information about the company
  • A non-compete clause that restricts the employee from working for a competitor for a certain period of time
  • A release of claims clause that requires the employee to waive any legal claims against the company

It’s important for both the employer and the employee to carefully review the terms of a severance agreement before signing it, and to seek legal advice if necessary. Once signed, a severance agreement is generally binding and enforceable, so it’s important to make sure that all parties fully understand the terms and implications of the agreement.

Learn More about Severance Agreements in CA

Contact Gallagher Krich APC, attorneys at law at (858) 926-5797 or by email at info@tomgallagherlaw.com for more information about a severance agreement in the State of California. Keep reading on California severance agreements here ›

Gallagher Krich, APC is a San Diego, California, based law firm. Attorney Tom Gallagher is responsible for this attorney advertising. This article does not establish an attorney-client relationship, which requires a written agreement.

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