Employment release agreements are contractual agreements between an employer and their employee. They are used to release the employer from any potential claims which may have arisen during the employee’s tenure at the company. In exchange, the employer provides the employee with certain consideration. This is often a severance package, but could include other provisions depending on the specific situation.
If you’re planning to ask an employee to sign a release agreement, it must comply with all applicable state and federal laws. For employers with workers in multiple states, researching and drafting a compliant one can be time consuming and expensive.
What is an employment release agreement?
An employment release agreement is typically signed just before a job ends. They are mutual agreements: typically, an employee agrees to release the employer from liability, in exchange for something of value. This might include severance, extended healthcare coverage, stocks and bonds and other valuable consideration.
Employment release agreements must comply with state and federal employment and contract law. Failure to ensure compliance opens your company up to significant risk. Because state and federal employment laws can change, you’ll need to research and confirm compliance each time you use one of these agreements.
Employment termination agreement sample
This sample employment termination and release agreement from Justia is a good example of how a release agreement could be structured and written. Note that the sample agreement offers the employee a significant severance package and extended healthcare coverage for a finite period of time. In exchange, the employee essentially agrees not to sue their former employer for any reason, including workers’ compensation, violation of local, state and federal statute, contract law violations, employment law claims, tort claims, and more.
Note that the sample agreement allows the employee to assist in local, state, or federal investigations against the company, so long as they do not intervene or receive any sort of benefit for their participation.
Because a employment release agreement may ask an employee to give up significant rights, the consideration needs to be commensurate—and the employee must be given the opportunity to review and negotiate terms appropriately. Savvy employees will make sure that their attorney reviews the documents before they agree to sign. Furthermore, both employers and employees can negotiate to include other provisions, such as non-compete or non-disparagement clauses.
Benefits of using an employment release agreement
Employers aren’t required to offer it, and employees are not required to sign them. However, they offer significant benefits for both parties.
Employment release agreements may contain provisions that have several obvious benefits: employers can rest assured that they will not face any claims from the employee while the employee receives compensation for their termination and waiving their right to sue. When properly constructed, an employment release agreement is legally binding. Both parties are entitled to negotiate, agree to the contract, or reject it.
These agreements protect companies from liability, but they can also make a parting of ways mutually amicable. If your company needs to lay off workers, a release agreement can make their remaining time at the company more pleasant than if they were to quit on their own or be fired suddenly. Both parties walk away with something of value. As long as the agreement is compliant with applicable laws, both parties should be in a better position after signing than they were before.
How to create an employee release agreement
Employment release agreements require careful research and wording. Some employers create their own agreements with the help of an attorney, but that’s often less than ideal. Those billable hours can add up fast. On the other hand, you don’t want to rely on online templates or copying and pasting online employment release agreements: there’s no guarantee the provisions are legal in the applicable jurisdictions. That opens your company up to significant liability.
Fortunately, SixFifty has a better way. We’ve taken the time, expense, and hassle out of drafting employment release agreements. Instead of researching and drafting your own agreements, or hiring a lawyer to do it for you, our Employment Docs platform helps companies, nonprofits and other organizations generate compliant employment-related documents in every state—including employment release agreements. From hiring through managing to separation, you can easily generate documents for every stage of the employment lifecycle.
Best of all, our legal team closely monitors changes to employment law across the nation. Employers can rest assured that no matter how the laws change, each generated employment release agreement will always be current. Ready to learn more? Schedule a demo today!
