The process of being separated from your company is often a surprising, confusing, and emotionally trying. You walk into a routine meeting with a supervisor only to find that a Human Resources representative is also present. Your supervisor hands over a lengthy document containing complex legalese that may not make sense, along with a packet of information about something called COBRA. Despite loyalty and years of hard work, the company has decided to “downsize” or “go in a different direction,” and the employee is asked to review and sign the severance agreement.
The document is frequently called a severance agreement, but sometimes it’s known as a separation or termination agreement, or even the verbose “separation agreement general release and covenant not to sue.”
But what do these things actually mean? A severance agreement is an agreement in which you settle any potential future claims you have against the company up front. In other words, a severance agreement is like a sales contract. You, as the employee being separated, are being offered certain things – usually money, a positive reference, and sometimes confidentiality regarding your separation. In exchange, the the company asks you to “sell” them a series of releases from future legal action and promises about how you’re going to behave going forward. This doesn’t necessarily mean that they believe you may have a claim against them; rather, they wish to stave off the expense of litigation of any claims you may bring while feeling singled out and possibly even discriminated against by being separated.