What is an Employee Separation Agreement?

What Are the Different Types of Employee Separations?

It is sometimes inevitable and often regrettable that many employer and employee relationships come to an end eventually. There are four primary types of employer/employee separations.

These include:

  • Dismissals. A dismissal is a type of firing as a punitive measure, brought about because either the employee was not performing up to the standards of the company, they were engaged in misconduct, or for another lawful reason.
  • Layoffs. Perhaps the most unfortunate type of employee separation, layoffs occur due to forces beyond the control of the employer. Common reasons that bring about layoffs include seasonal losses, loss of workspace, shortage of materials needed to complete the jobs, and other reasons, most of them related to expenses and the needs of the workforce.
  • Resignations. When an employee quits, this is called a resignation. This could be voluntary or involuntary. Examples of involuntary resignations include instances when the employer gives an employee the option to quit or face disciplinary action.
  • Retrenchment. Similar to a layoff, retrenchment is when a company terminates the employment of a worker because of low demand for the company product, surplus staff, economic concerns, or financial slowdown.

For many employees, there is very little difference between being fired and getting laid off. Alternately the difference is that those who have been laid off saw their employment terminated through no fault of their own. Conversely, those who were fired or dismissed had their employment terminated because they were not performing to the standards of their employers or were engaged in employee misconduct.

An employee separation agreement is a legal document that represents the particulars related to the employer and the soon-to-be terminated employee. Upon being signed by both the employer and employees, employee separation agreements mandate that the terminated employee cannot sue or take future legal action against the company in regard to their untimely release.

Are Separation Agreements Legally Enforceable?

Just because both parties signed the employment separation agreement doesn’t mean that the document is legally enforceable. It may be possible to challenge a signed employee separation agreement document.

A common means to challenge separation agreements after they’ve been signed is to question the enforceability of the contract. It may be determined that certain legal terms and provisions may be illegal or inadmissible according to Illinois law when unenforceable terms are part of employment separation agreements. Employment law courts may elect to strike down certain provisions or void the entire document.

What is Covered Within Employee Separation Agreements?

The key details covered in practically all employee separation agreements include separation details, severance details (if any), the existence of any confidentiality clause or restrictive covenant, and a reference to age discrimination.

The separation agreement should lay out basic terms and understanding of the separation details. This may likely include reasons for the separation, such as dismissal, layoff, or resignation.

Oftentimes employers will use a severance package as a means to help incentivize employees to sign their employment separation agreements. Severance packages can include numerous benefits, including additional payments for a certain amount of time, continued health insurance, and potentially even stock options.

Severance packages are optional. The law only dictates that employers provide a wage for the final working day and any leftover vacation time. The decision to offer a severance package is up to the employer, and the decision to sign the employment separation agreement is up to the employee. If you are a soon to be ex-employee, it is worth taking the time to study your employer’s separation agreement terms and how

The employment separation agreement includes terms that clarify the employee is waiving their right to bring a legal claim against their former employer. What this means is that by signing, you cannot hope to bring a future lawsuit against your ex-employer. Examples of lawsuits that you are waiving your right to pursue include wrongful termination claims.

It is possible that an employer includes a restrictive covenant of some kind, such as a non-compete clause, a nondisclosure agreement, or a confidentiality agreement. If you’ve already signed on to any of these restrictive covenants at the beginning of your employment, it is possible that they may be skipped or glossed over in your separation agreement. However, there exists a chance that they may be brought up again just to reiterate the facts. If you sign onto any of these clauses, you must obey the terms of the clauses under legal penalties.

If employees are over the age of 40, they are protected by the Older Workers Benefit Protection Act (OWBPA). This act is part of the Age Discrimination in Employment Act (ADEA). By signing the contract, you concede that you are not being dismissed because of your age.

When Should You Negotiate Your Employee Separation Agreement?

Getting noticed that you have lost your job can be shocking. It is natural to want to negotiate for better terms at this point in your career. Even if you saw the bad news coming, sometimes employing your

Employees have the right to negotiate for the most favorable severance package possible. Even if they do not have a strong basis to argue for such terms, they still have the right to do so.

In some cases, employers are not ready and willing to negotiate the terms of their employee separation agreement. In such instances, it is highly recommended that you retain professional legal counsel to represent your legal rights.

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Employee separation agreements are part of doing business in Illinois. Nobody likes them, but they are a necessity for progress.

Whether you are an employer drafting an employee separation agreement or a soon-to-be ex-employee who is considering whether or not to sign their agreement, it is highly recommended that you retain the services of employment law attorneys to represent your interests. Our law firm has extensive experience representing both employers and employees as our clients in separation agreement disputes. To learn more about our legal services, please contact our law firm to schedule your initial consultation. 847.654.9200.