Many Illinois employers wonder whether they need to use an employment separation agreement (sometimes called a “separation and release agreement”) for terminated employees. Although Illinois is an “at-will” state and most Illinois employers do not have to provide these agreements, they offer many benefits to employers. A well-drafted separation agreement creates closure to the employer/employee relationship and provides a framework for ending the relationship in an amicable and orderly fashion that protects an employer’s business.
Why Use Employment Separation Agreements?
Aside from bringing closure to the employer/employee relationship, there are many other benefits of employment separation agreements that employers should consider. For example, a separation agreement should include a release of claims by the employee. There are many claims, demands, and actions that an employee may release in a separation agreement, including claims related to unlawful discrimination, wrongful discharge, hostile work environment, and employment practices. A properly drafted separation agreement includes a broad release of claims in favor of the employer.
A separation agreement may also help an employer preserve its confidential information that the employee may have had access to during his or her employment. The separation agreement not only may prohibit an employee from disclosing the employer’s confidential information, but also may prevent an employee from using the employer’s confidential information to the employee’s (or his or her future employer’s) benefit.
Further, a separation agreement may protect an employer from an employee competing with the employer or soliciting the employer’s customers or employees for a period of time after termination. For employers concerned that a former employee may solicit business or employees away from the employer, the separation agreement can address this concern and provide an employer with the tools to preserve its key relationships with its employees and customers.
What Makes an Employment Separation Agreement Valid?
Any Illinois employer seeking to enter into a separation agreement with a terminated employee should consult legal counsel knowledgeable in employment law. Separation agreements can be tricky and there are many pitfalls for employers to avoid. For example, an employer must offer an employee something in return (“consideration”) for releasing claims against the employer. Otherwise, there has been no bargained-for exchange and the separation agreement is not a valid contract. Further, the consideration that an employer offers cannot be something that the employee is already entitled to, such as wages, commissions, or already-earned vacation pay.
Another potential pitfall for employers is that some claims that employers seek to have an employee release require that the employer give the employee sufficient time to consider the terms of and execute the separation agreement. After signing the agreement, the employee also may be entitled to additional time to revoke the agreement. An employment attorney can advise employers on when these review periods apply and help an employer avoid having the entire agreement invalidated by a court because the employer unknowingly did not give the employee sufficient time to review and consider the agreement.
Even employers who already use separation agreements should consider having an attorney review their current agreements to ensure they still are compatible with Illinois law. For example, recent changes to Illinois law make it much harder (or impossible) for employers to require arbitration of certain claims. Another recent change in Illinois law creates new requirements for employers seeking to have employees agree to confidentiality provisions. An experienced employment law attorney can ensure that a separation agreement complies with current Illinois law.
Summary
Employment separation agreements provide a lot of benefits to employers, including certainty and protection of an employer’s business against claims and competition by a former employee. As these agreements can be tricky, however, employers should consult a knowledgeable employment law attorney to ensure that their separation agreements are valid and enforceable.
For more information about this article or Illinois employment law in general, please contact Albee Law PC via telephone at (312) 279-0115 or by email at info@albeelaw.com.
