Even if there is no agreement and no policy mandating severance payments, employers often choose to make them to their departing employees. This is because in exchange for such payments, the employer receives peace of mind, or as legally known, a release of rights. Typically, in exchange for the receipt of severance pay, an employee will waive the right to bring any claims against the employer. Employees may also be asked to affirm or reaffirm important confidentiality, non-solicitation or non-compete obligations, all of which protect the business of the employer.

For employers it is quite important to note that severance agreements containing releases must comply with many technical requirements in order to be enforceable. It would be a serious blow for an employer to pay a significant sum of money to a departing employee as a measure of protection and peace of mind, only to find out later that the agreement under which payment was made does not pass legal muster and does not in fact protect the employer from lawsuits, raiding of its staff, or the solicitation of its customers by the departing employee.

By way of a single example of the technical detail required for enforceable agreements, under ADEA (the federal age discrimination law), employees who are 40 or older must be provided at least 21 days to accept the severance offer. The severance pay agreement must also state that the terminated employee has an unqualified 7 days to revoke his acceptance of the severance payment offer. If the agreement does not contain such detailed language, it may well be considered null and void and therefore of no protection to the employer. HR should carefully coordinate separation agreements with counsel.