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An overview of severance agreements

On Behalf of | Jul 21, 2023 | Employment Law For Employers

A business may decide to sign a severance agreement, which ends the employment relationship with their employee. This may be because the employer wants to terminate the employee or where there is a mutual agreement between them. There are several elements that may be included in the severance agreement.

Severance agreement elements

The agreement usually includes severance pay, based on how long the employee worked for the employer. It may also address how long the employee’s benefits will continue, like health insurance.

Many severance agreements also include a requirement for the employee to keep company information confidential and a clause that prevents them from working for a competitor.

It may also include a requirement that by accepting the severance agreement, the employee releases all claims against the employer.


Employees may disagree with how much they are paid in the severance package or may want benefits extended further than the agreement states. Depending on the circumstances of the employee’s departure, the employer can consider changing these items.

They may also have concerns that a clause that prevents them from working for a competitor is too restrictive. It’s helpful to be very clear how long the clause applies. Also, if the employer includes a confidentiality clause it can specify which company information that applies to avoid confusion.

If there is a dispute, the employer and employee can start with a conversation to find a mutual agreement. However, if that does not resolve the situation, they have the option to pursue legal remedies.