Separation Agreement Or No Separation Agreement?

When an employer terminates an employee, it has to decide whether to offer the employee separation pay (severance) in return for a release of claims. (See previous Legal News: Employment Law Weekly Update, May 29, 2012). Employers are generally not legally required to provide separation pay. Some employers choose never to offer separation pay, or to do so only in very limited circumstances. For many employers, though, offering separation pay is almost the default position — they offer separation pay almost as a matter of course to terminated employees. This is no doubt driven in part by a desire to avoid the risk and expense of employment lawsuits. But, is it the right approach? After all, most terminated employees do not file lawsuits, and if an employer offers separation pay to all of them, it will be paying separation pay to a great many individuals who would never have pursued litigation. Instead of presuming separation pay is appropriate in most or all situations,