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Should Your Business Use Employment Separation Agreements?


You probably know that in Florida, you don’t need an employment contract to hire someone, and you certainly don’t need a reason to fire someone, Florida being an at-will employment state. So it may seem odd to you to consider proposing an employee sign a contract when the employee is being fired, or when the employee is leaving the business for any reason.

Why Use an Employment Separation Agreement?

Employment separation agreements can have a number of benefits for your company. The main benefit is that the separation agreement can prevent an aggrieved (soon to be former) employee from suing your business. Many employees may be happy at work, and have no problems at all, but should they be terminated, you can anticipate that they may end up suing your business for any number of legal violations.

A separation agreement avoids this, because the agreement contains in it a waiver and settlement of all claims–the employee is agreeing, in writing, that you have done nothing wrong, and that the employee will not and cannot sue you.

What You Give in Return

Why would the employee agree to this? Because your company will be giving the employee some benefit in return. The benefit may be money, or a severance package. It may be a continuation of benefits for a set period of time. It may be an agreement to release an employee from a noncompete (or other) agreement.

Anything of value, monetary or nonmonetary, can serve as the consideration needed to make the employment termination agreement valid and binding.

Non-Monetary Benefits

You can also get additional benefits from an employment separation agreement. Some benefits may include a confidentiality agreement (if the employee has not previously signed such an agreement). You can even have the (soon to be former) employee sign a non-compete agreement as he or she is ending employment, in return for whatever you have offered him or her.

You can include non-disparagement clauses, or agreements that the former employee won’t solicit your clients or your current employees.

When to Use An Agreement

Usually separation agreements are used for higher ranking officials, or employees who could compete against you after they leave your company, or who have significant value claims against your company–you likely wouldn’t give or need to give one to a lower level worker, but you certainly could–especially if you suspected the employee may be litigious.

Being Fair

You should be careful with these agreements, to make sure that they have some semblance of fairness. Forcing an employee to waive significant discrimination claims, or claims that the employee was grossly underpaid, in return for a nominal amount of money, could be seen as unconscionable by a court.

You should also give an employee time to review the separation agreement, so as to avoid claims of undue influence or coercion.

Call the West Palm Beach employment lawyers at Pike & Lustig to help you draft the documents you need to keep your business safe and out of legal trouble.

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