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What is an employee severance agreement?

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Quick Answer

An employee severance agreement is a release that an employee signs to receive a severance package, which may include money, insurance benefits, unemployment compensation, outplacement services and other benefits, explains Nolo. Employees who sign such a release agree not to sue the employer or company in the event of termination.

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Full Answer

A severance agreement helps avoid lawsuits filed by terminated employees, states Nolo. Employees who sign a release typically receive extra benefits compared to employees who have not signed one. The Older Workers Benefits Protection Act mandates employers to provide a specific set of benefits to employees age 40 years old or older and to give these employees the option to revoke the agreement for a certain period.

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