What Should Employers Include In Severance Agreements?

 Posted on June 26, 2025 in Business Formation

Severance agreements serve as critical legal documents that protect employers during workforce transitions. They are crucial when terminating employees who have access to confidential information, trade secrets, or sensitive client relationships. Consider using severance agreements for departing executives or key employees who might pose competitive threats, employees who have raised complaints or concerns that could lead to litigation, or situations where the termination circumstances could be viewed as controversial.

When drafted thoughtfully, these agreements can minimize legal risks while ensuring smooth departures. An experienced Fort Worth, TX business contracts attorney can negotiate and draft your severance agreement. 

What Should You Include In Your Severance Agreement?

Define Clear Terms and Expectations

Establish precise language regarding severance benefits, including payment amounts, timing, and any conditions that must be met. Specify whether payments will be made as a lump sum or installments, and clearly outline what constitutes compliance with the agreement. Ambiguous terms often lead to disputes, so invest time in creating unambiguous language that leaves no room for misinterpretation.

Include Comprehensive Release Provisions

The release clause represents the cornerstone of most severance agreements. Ensure your release language covers all potential claims the employee might have against the company, including discrimination, harassment, wage and hour violations, and breach of contract claims. However, remember that certain rights cannot be waived, such as the right to file charges with government agencies or claims that arise after the agreement is signed.

Address Confidentiality and Non-Disparagement

Protect your company's sensitive information and reputation by including robust confidentiality provisions. These clauses should cover trade secrets, client information, business strategies, and proprietary processes. Consider adding mutual non-disparagement language that prevents both parties from making negative statements about each other, which can be particularly valuable in today's social media landscape.

Consider Post-Employment Restrictions Carefully

While non-compete and non-solicitation clauses can protect legitimate business interests, they must be reasonable in scope, duration, and geographic limitations. Ensure any restrictive covenants are tailored to protect specific business needs rather than using overly broad language that might render them unenforceable.

Comply with Federal and State Requirements

Federal laws like the Older Workers Benefit Protection Act require specific procedures when employees over 40 are involved, including 21-day consideration periods and seven-day revocation rights. In Texas, employers must be aware that final paychecks are due by the next regularly scheduled payday, and the state follows at-will employment principles that can affect severance negotiations. 

Provide Adequate Consideration

The severance package must offer something of value beyond what the employee is already entitled to receive. This might include extended health benefits, outplacement services, or enhanced references. The consideration should be proportionate to what you are asking the employee to give up.

Call a Fort Worth, TX Business Contracts Lawyer

If you are negotiating a severance package with your employee or drafting a company severance agreement, you can receive skilled guidance from the experienced Fort Worth, TX business contracts attorney at Gonzalez Law, PLLC. Call the law firm for a consultation at 817-349-7330 to discuss how you can protect your business interests with a strong severance agreement.