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Severance Pay Agreement Template for United States

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Key Requirements PROMPT example:

Severance Pay Agreement

"I need a Severance Pay Agreement for a senior technology executive leaving the company, including non-compete provisions and extended health benefits, with severance paid over 12 months starting March 2025."

Document background
The Severance Pay Agreement serves as a critical document in U.S. employment law, used when an employer wishes to provide financial compensation to a departing employee in exchange for certain commitments and releases. This agreement typically arises during workforce reductions, executive departures, or amicable separations. It outlines severance payments, benefits continuation, release of claims, and ongoing obligations such as confidentiality and non-competition. The agreement must comply with federal regulations including ADEA and OWBA, particularly regarding consideration periods and rights of revocation.
Suggested Sections

1. Parties: Identification of the employer and employee, including full legal names and addresses

2. Background: Context of the employment termination and purpose of the agreement, including employment history and termination date

3. Definitions: Key terms used throughout the agreement including 'Effective Date', 'Severance Payment', 'Released Claims', etc.

4. Severance Payment Terms: Detailed terms of severance payment including amount, payment schedule, tax treatment, and conditions for payment

5. Release of Claims: Comprehensive release of legal claims against the employer, including specific statutes and types of claims being waived

6. Confidentiality Obligations: Terms regarding non-disclosure of agreement terms and continued protection of company confidential information

7. Return of Company Property: Requirements and timeline for returning all company property, documents, and information

8. Governing Law: Specification of jurisdiction and applicable law governing the agreement

9. Acknowledgments: Employee acknowledgments regarding voluntary acceptance, time for review, and right to counsel

Optional Sections

1. Non-Compete Provisions: Restrictions on future employment and competitive activities, used when protecting business interests is crucial

2. Non-Solicitation Provisions: Restrictions on soliciting employees, customers, or suppliers, used when protecting business relationships is important

3. Outplacement Services: Terms of career transition support services, included when offering additional transition assistance

4. Benefits Continuation: Terms for continuing health insurance or other benefits, including COBRA details, used when extending benefits beyond termination

5. Reference and Communication: Terms regarding future employment references and communication about the separation, used when parties want to control messaging

Suggested Schedules

1. Schedule A - Calculation of Severance Payment: Detailed breakdown of severance amount calculation, including base salary, bonuses, and other compensation elements

2. Schedule B - Company Property Checklist: Comprehensive list of company property to be returned, including devices, documents, and access credentials

3. Schedule C - Benefits Continuation Details: Specific details of any continued benefits, including coverage periods and payment responsibilities

4. Appendix 1 - Release of Claims Form: Detailed release form incorporating all statutory requirements and specific claims being waived

Authors

Alex Denne

Head of Growth (Open Source Law) @ ¶¶Òõ¶ÌÊÓÆµ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

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Industries

ADEA Compliance: Age Discrimination in Employment Act requirements for protecting workers 40 and older from age discrimination in severance agreements

OWBA Requirements: Older Workers Benefit Protection Act specifications for valid waivers, including 21/45 day consideration periods and 7-day revocation rights

Title VII Considerations: Civil Rights Act provisions ensuring severance agreements don't discriminate based on race, color, religion, sex, or national origin

ADA Compliance: Americans with Disabilities Act requirements to ensure severance terms don't discriminate against employees with disabilities

FLSA Regulations: Fair Labor Standards Act requirements regarding wage and hour laws affecting severance calculations

ERISA Considerations: Employee Retirement Income Security Act implications for benefit plans and severance arrangements

WARN Act Compliance: Worker Adjustment and Retraining Notification Act requirements for mass layoffs and plant closings

IRC 409A: Internal Revenue Code Section 409A regulations governing deferred compensation in severance arrangements

Tax Treatment: Federal and state tax implications for severance payments, including withholding requirements and reporting obligations

State WARN Requirements: State-specific WARN Act requirements that may exceed federal standards

State Termination Laws: State-specific requirements for employment termination and severance agreements

Release Requirements: Federal and state requirements for valid releases of claims in severance agreements

Non-Compete Provisions: State-specific restrictions and requirements for enforceable non-compete and non-solicitation clauses

COBRA Compliance: Requirements for continuation of health benefits under the Consolidated Omnibus Budget Reconciliation Act

Industry Regulations: Sector-specific requirements and professional licensing considerations affecting severance terms

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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