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Mutual Severance Agreement Template for United States

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Key Requirements PROMPT example:

Mutual Severance Agreement

"I need a Mutual Severance Agreement for our Senior VP of Sales who is leaving amicably on March 1, 2025, including a 6-month non-compete clause and continued health benefits, with a severance package worth 12 months' salary."

Document background
The Mutual Severance Agreement serves as a comprehensive document that facilitates a clean break between employer and employee while protecting both parties' interests. It is commonly used during restructuring, voluntary departures, or negotiated exits. The agreement must comply with U.S. federal and state employment laws, including mandatory waiting periods and specific language requirements for age-related releases. Key components typically include financial compensation, benefit arrangements, and mutual releases of legal claims. This document is particularly important when dealing with senior executives or in situations where there might be potential disputes.
Suggested Sections

1. Parties: Identifies the employer and employee entering into the agreement

2. Background/Recitals: States the context and circumstances leading to the severance agreement

3. Definitions: Defines key terms used throughout the agreement

4. Separation Date: Specifies the effective date of employment termination

5. Severance Payment: Details the amount, timing, and form of severance compensation

6. Release of Claims: Mutual release of legal claims between parties

7. Confidentiality: Obligations regarding non-disclosure of confidential information

8. Return of Company Property: Requirements for returning company assets and materials

Optional Sections

1. Non-Compete: Restrictions on future employment - include when protecting legitimate business interests is crucial

2. Non-Solicitation: Restrictions on soliciting employees or customers - include when protecting workforce and customer relationships is important

3. Benefits Continuation: Terms for continued health benefits or other benefits - include when offering COBRA or other benefit extensions

4. Outplacement Services: Provisions for career transition assistance - include when providing additional support services to departing employee

Suggested Schedules

1. Schedule A - Severance Calculation: Detailed breakdown of severance payment calculation

2. Schedule B - Benefits Summary: Summary of continuing benefits and their duration

3. Schedule C - Company Property List: Itemized list of company property to be returned

4. Exhibit A - Release of Claims: Detailed release language as required by applicable laws

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 & OWBPA: Age Discrimination in Employment Act and Older Workers Benefit Protection Act - Key federal laws that protect workers 40 and older, requiring specific provisions in severance agreements including mandatory review periods

Title VII Civil Rights Act: Federal law prohibiting discrimination based on race, color, religion, sex, and national origin - must ensure severance agreement doesn't waive these rights improperly

ADA Compliance: Americans with Disabilities Act requirements must be considered in severance terms and release language

FLSA Considerations: Fair Labor Standards Act implications for wage payments, overtime calculations, and other compensation elements in severance package

WARN Act: Worker Adjustment and Retraining Notification Act requirements for mass layoffs or plant closings, affecting severance timing and terms

ERISA Compliance: Employee Retirement Income Security Act regulations affecting benefit plans and continuation of benefits in severance agreements

IRC Section 409A: Internal Revenue Code requirements for deferred compensation and timing of severance payments to avoid tax penalties

State Wage Laws: State-specific requirements for final wage payments, timing of severance payments, and related compensation issues

State Benefits Laws: State-specific requirements for continuation of health benefits and other benefit-related obligations

EEOC Guidelines: Equal Employment Opportunity Commission guidelines for proper release of discrimination claims and other employment rights

Release Requirements: Federal and state-specific requirements for valid release of claims, including consideration and revocation periods

Tax Withholding Rules: IRS and state requirements for tax withholding on severance payments and proper tax reporting

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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