A mutual separation contract is an agreement between an employer and an employee. It sets out the term of an amicable separation.
Employees agree not to undertake future legal or disciplinary action after their position is terminated, usually in exchange for a severance package.
The following points cover how mutual separation agreements work:
Let’s explore the points outlined above in a little more depth.
The term “mutual separation agreement” is used interchangeably with “employment separation agreement.” Both types of documents are the same.
A mutual separation agreement is a contract between an employee facing termination and their employer.
By signing a mutual separation agreement, an employee waives their right to bring legal or disciplinary actions against their former employer.
A mutual separation agreement essentially states that two parties are separating amicably. It protects the employer from time-consuming and potentially costly legal proceedings.
The employee also benefits because they avoid having a “black mark” on their resume and can tell future employers that they left their previous job on good terms.
Mutual separation agreements may also contain further restrictions on a past employee’s activities. These typically include non-disclosure agreements (especially in regards to corporate “secrets”), working in a similar field for a period, making disparaging comments about the employer, and so on.
However, if terms and conditions conflict with existing law and public policy, mutual separation agreements may be deemed unenforceable. It is not usually possible, for instance, to completely prevent a past employee from working in a particular industry.
Mutual separation agreements tend to be straightforward documents. Most organizations will use a standard template like the one provided by PandaDoc.
In most cases, mutual separation agreements contain the following sections:
The names of the employer and employee.
The date on which the employee will leave the organization.
Details of any compensation and other benefits given to the employee.
The most important section of a mutual separation agreement is the waiver. It is an outline of activities that the employee is prohibited from undertaking, such as suing a company or beginning wrongful termination proceedings.
Any additional terms, such as requiring the employee to return any property belonging to the organization.
An area for both parties to approve the document by affixing their signature.
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