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Severance Agreements and Release of Claims

Employers should use severance agreements whenever the employer provides severance pay or other valuable benefits to a departing employee to which the employee is not already entitled.  Most commonly, severance pay is a lump sum payment calculated based upon a formula, though severance arrangements may vary widely.

When an employer voluntarily offers severance benefits, the employer should generally obtain a severance agreement which includes a release by the departing employee of any and all claims against the employer that may arise from the employee’s employment, including claims of discrimination, wrongful discharge, etc.  The agreement should be crafted by a knowledgeable employment attorney.  Among other things, an agreement for any employee over the age of 40 must comply with the Older Workers Benefits Protection Act (OWBPA), which requires a number of specific provisions in the agreement.  Absent those provisions, any waiver of age discrimination claims is void.


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