A reminder for employers: Review your separation agreements

Companies routinely use separation agreements with departing employees. Through those agreements, the employee receives some type of separation benefit (typically a payment or severance) in exchange for waiving and releasing any potential claims against the company.

The goal is to avoid an existing or potential dispute, claim, or lawsuit. But if companies don’t routinely review and update those agreements, they risk the agreement being challenged or invalidated. Even worse, companies are sometimes investigated and forced to pay fines or penalties for provisions in the agreements. A recent settlement announced by the Securities and Exchange Commission (SEC) provides a strong reminder to employers to regularly review and update agreements used with employees.