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Severance Agreement and Release

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AGREEMENT AND RELEASE

AGREEMENT made this day of , 20 , between , hereinafter called the and , hereinafter called the

WHEREAS, has been employed by Employer as ; and

WHEREAS, Employee’s employment with Employer has been terminated effective the day of , 20 ;

NOW, THEREFORE, in consideration of their mutual promises set forth herein, the parties hereby agree as follows:

1. Employee and Employer agree that Employee, in addition to his salary for the time he has worked for the month of , will receive a check in the amount of $ which is the amount that Employee has vested in his retirement account. Employee will also receive a check in the amount of $ which represents the unvested amount in his retirement account, from which will be deducted Federal, State, and Social Security withholding. Employee shall also receive severance pay in the amount of $ per month for the next three months less Federal, State, and Social Security withholding, which net amounts shall be paid to Employee on the first day of each month for the next three months; provided, however, severance payments shall be permanently discontinued and any amounts already paid immediately refunded to Employer, should Employee or a member of his immediate family ever publicly make disparaging statements about Employer. Notwithstanding the foregoing, said severance payments will be reduced by the amounts that Employee receives as unemployment compensation pursuant to the Employment Security Act.

2. The undersigned , does hereby release and forever discharge , , and all of its officers, trustees and employees of and from all claims, demands, actions, causes of actions, and liabilities whatsoever, in law or in equity, which Employee had, or now has, against and said above-named persons, for, upon, and by reason of any matter, cause or thing whatsoever, including, but not limited to, any oral or written contract between and Employee. It is the intent of Employer and Employee that this agreement be a release of all claims of Employee against Employer, whether they arise under State law, Federal law, or otherwise. The undersigned acknowledges that his attorney, , has reviewed this agreement and that he is executing this agreement pursuant to his counsel.

WITNESS OUR SIGNATURES, this the day of , 20 .

BY:

, President

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What a Severance Agreement and Release Is

A Severance Agreement and Release is a contract between an employer and an employee that conditions a separation payment or benefit on the employee’s agreement to release certain legal claims. Typical provisions define the severance payment or benefits, the scope of the release, confidentiality and non-disparagement obligations, return of employer property, tax and withholding treatment, and dispute-resolution procedures. Employers use these documents to reduce post‑employment litigation risk and set clear post‑termination obligations; employees receive negotiated consideration and a written record of agreed terms.

Why a Clear Severance Agreement Matters

A well‑drafted Severance Agreement and Release reduces litigation risk, documents the parties’ expectations, and protects confidential information while specifying tax and benefit treatment. It creates certainty for both sides and can speed final settlement and administrative processing.

Why a Clear Severance Agreement Matters

Who Typically Prepares and Signs These Agreements

Employers, HR teams, in‑house or outside counsel, and departing employees commonly use Severance Agreements and Releases to negotiate and document separation terms.

  • Human resources teams handling payroll, benefits continuation, and policy compliance during separation.
  • Employment counsel drafting release language, reviewing statutory exceptions, and ensuring enforceability.
  • Employees or their individual counsel reviewing consideration, revocation rights, and tax effects.

Each party’s role differs: employers draft and present terms; employees evaluate consideration and legal effect before signing or negotiating.

Typical Signatory Roles

HR Manager

HR Managers coordinate payments, benefits continuation, and distribution logistics, and ensure the agreement aligns with company policy and payroll processes. They often handle internal approvals and maintain records of executed agreements.

Employment Counsel

Employment Counsel reviews release scope, statutory exceptions (age discrimination waivers, trade secret carve‑outs), and negotiates language to reduce future litigation risk while documenting legal compliance and employer obligations.

Security, Compliance, and Record Features to Include

Encryption: TLS 1.2/1.3 in transit; AES‑256 at rest
Audit Trail: Timestamps, IP, signer actions
BAA Availability: HIPAA BAA if PHI involved
Access Controls: Role‑based user permissions
Retention Controls: Version history and export options
Certifications: SOC 2 Type II, ISO 27001

Risks of an Incomplete or Incorrect Agreement

Unenforceable Release: Overbroad or vague release language
Tax Misclassification: Incorrect withholding or reporting
Benefit Disputes: COBRA or pension timing errors
ADEA Noncompliance: Age‑discrimination waiver defects
Confidentiality Gaps: Insufficient trade secret protections
Recordkeeping Failures: Missing originals or audit trail

Common Preparation Mistakes to Avoid

  • Using vague consideration language such as "reasonable severance" instead of a specific dollar amount or benefits schedule can create disputes about what was agreed.
  • Failing to address statutory exceptions (e.g., age discrimination waivers) or to provide required election and revocation periods can render a release partially unenforceable.
  • Neglecting to specify tax withholding and reporting responsibilities creates downstream payroll and IRS compliance issues for both parties.
  • Not preserving a verifiable signature record or audit trail when signing electronically increases evidentiary hurdles if enforceability is contested.

Step‑by‑Step: Preparing and Completing a Severance Agreement

Follow a clear sequence from drafting through final execution to ensure legal compliance and maintain a reliable record of the transaction.

  • 01
    Draft Agreement: Define payments, release scope, and obligations clearly.
  • 02
    Legal Review: Have counsel check statutory waivers and exceptions.
  • 03
    Offer & Negotiation: Present terms and document any revisions in writing.
  • 04
    Execution: Signed by authorized reps; retain signed copies.

How Electronic Execution Typically Works

Electronic signing follows a predictable workflow that preserves intent, attribution, and a tamper‑evident record acceptable under ESIGN and UETA.

  • Upload Document: Place signature and date fields in the correct locations.
  • Add Signers: Assign roles and signing order where needed.
  • Authenticate Signers: Use email, SMS code, or stronger methods for identity.
  • Capture Audit Trail: Retain timestamps, IP, and action logs for proof.

Core Clauses to Include in a Professional Severance Agreement

A complete Severance Agreement and Release uses clear clause headings and defined terms so parties understand obligations, limits, and the scope of what is being released.

Release Clause

Specify the exact claims waived, any carve‑outs for statutory rights, and whether the release is mutual or employee‑only. Clarity avoids post‑termination litigation.

Consideration

Describe the severance payment, benefit continuation, stock treatment, or other consideration, including payment schedule and tax withholding instructions.

Non‑Disclosure

Define confidential information, permitted disclosures, and survival period to protect trade secrets and sensitive data after departure.

Non‑Disparagement

State acceptable public statements and remedies for breaches to limit reputational harm for either party.

Return of Property

Require return of devices, documents, credentials, and access revocation steps to complete transition and secure systems.

Governing Law

Identify the governing state law and dispute resolution method, which affects interpretation, enforceability, and venue for challenges.

Typical Digital Workflow Settings for Execution

Configure a digital signing workflow to control order, authentication, notifications, and retention for a secure execution process.

Field Configuration
Signing Order Sequential | Employer then employee
Authentication Email or SMS code | Optional KBA for added identity assurance
Notifications Automatic reminders | Customizable frequency
Storage Encrypted archive | Retain copy and audit trail

Technical Considerations for eSigning and Storage

Ensure the signing platform supports legal evidentiary elements, secure storage, and integration with existing systems.

  • Integrations: CRM, HRIS, and cloud storage connectors to centralize records
  • Document Formats: PDF and DOCX support for source and signed copies
  • Authentication Options: Email, SMS, KBA, and 2FA for signer verification

Configure retention, backup, and access logs to meet internal policy and regulatory obligations while ensuring a reproducible audit trail for disputes.

Key Timing and Processing Expectations

Certain timelines affect enforceability, tax reporting, and benefits continuation; plan the sequence to meet legal and administrative deadlines.

Employee Consideration Period:

ADEA waivers often require a 21‑day consideration period for employees 40 and older

Revocation Window:

Some statutory waivers allow a 7‑day post‑execution revocation period

Payment Timing:

Specify payment date or payroll cycle to avoid withholding disputes

Benefits Notices:

Provide COBRA and benefits continuation notices per plan and regulatory timing

Tax Reporting:

Report severance on year‑end forms per IRS rules and payroll guidance

Milestone Timeline from Offer to Recordkeeping

A sequential milestone view helps track approval, execution, payment, and retention tasks during and after separation.

01

Offer Drafted

Employer prepares draft and secures internal approvals before presenting to employee.

02

Employee Review

Recipient reviews terms and may consult counsel within the consideration period.

03

Agreement Executed

Both parties sign; capture audit trail and proof of consent.

04

Payment & Recordkeeping

Process severance payments and store signed document with payroll and HR files.

Comparison: eSignature Providers for Executing Severance Agreements

Common vendor differences include price model, bulk send, audit capabilities, HIPAA support, and envelope limits; signNow is listed first for comparison.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial Yes, 7‑day free trial Varies Varies Varies Varies
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No

Example Use Cases

Representative scenarios show how severance agreements resolve common separation issues while allocating risk and payment obligations.

Small Business Separation

Owner offers a lump‑sum payment for release and return of property

  • Employee negotiates a short non‑disparagement clause
  • The agreement documents payment, ends claims, and prevents future disputes while preserving references.

Executive Transition

Company proposes multi‑installment severance tied to vesting schedule

  • Executive requests tax‑gross‑up and extended benefits
  • Final agreement includes detailed payment schedule, tax treatment, and confidentiality provisions tailored to the role.

Practical Tips for Accurate and Efficient Completion

Follow standardized drafting, clear numeric entries, and a consistent eSigning process to reduce errors and administrative friction.

Use Precise Language
Spell out dollar amounts, dates in MM/DD/YYYY, and exact claims being released to avoid ambiguity and conflicting interpretations.
Coordinate Payroll
Plan severance payment timing with payroll to apply correct withholding and generate accurate year‑end reporting for IRS and state agencies.
Document Consent
For consumer or employee‑facing releases, record electronic consent procedures consistent with ESIGN and UETA requirements to validate signatures.
Retain Audit Trail
Keep tamper‑evident signed copies, timestamps, and access logs to support enforcement and resolve disputes.

Frequently Asked Questions About Severance Agreements

Answers to common questions about enforceability, electronic signing, revocation periods, and recordkeeping for Severance Agreements and Releases.


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