Run: Severance Agreement Policy Template

This policy establishes the standards and approval process for offering severance in connection with employee separations. It is intended to ensure severance decisions are applied consistently, documented appropriately, and administered in compliance with applicable U.S. employment laws, including the ADEA, OWBPA, EEOC requirements, and the FLSA. This policy is a template and must be reviewed by Human Resources and Legal before use. It does not create a contract of employment or guarantee severance in any circumstance.

This policy applies to all U.S.-based employees and, where permitted by local law, to workers classified as employees at the time of separation. It applies to involuntary separations, role eliminations, reductions in force, and other separation events where severance may be considered. It does not apply to independent contractors, interns, or contingent workers unless expressly approved in writing by Legal. California employees: any release, waiver, or severance term must be reviewed for compliance with California law, including any applicable restrictions on non-disparagement, confidentiality, and release language. State-specific requirements may apply to final pay, benefits, and wage statements.

Severance may be considered when one or more of the following conditions are met: - The employee is separated due to a reduction in force, position elimination, reorganization, or business closure. - The separation is involuntary and not based on gross misconduct, policy violations, or performance issues that warrant immediate termination without severance. - The employee signs all required separation documents, including a valid release of claims where permitted by law. - The employee returns company property and completes exit obligations by the required deadline. Severance is discretionary unless a written employment agreement, plan document, or collective bargaining agreement states otherwise. Employees terminated for fraud, theft, violence, harassment, serious misconduct, or material breach of duty are generally not eligible unless an exception is approved by the policy holder and Legal.

Severance amounts must be documented in the separation approval record and may be based on one or more of the following factors: - Years of service - Job level or grade - Reason for separation - Rehire eligibility status - Business unit or program-specific guidelines The policy holder must define the calculation formula used for each severance program, including any minimums, maximums, and prorations. The formula must be applied consistently to similarly situated employees unless a documented business reason supports a deviation. The severance agreement must specify: - Gross severance amount and payment schedule - Whether payment is lump sum or salary continuation - Treatment of accrued but unused vacation or paid time off, subject to state law - Treatment of bonuses, commissions, and expense reimbursements - Required payroll withholding and tax reporting FLSA compliance: severance payments must be reviewed to ensure they are not improperly treated as wages, salary, or overtime compensation. Severance should not be used to offset earned wages, overtime, or other amounts required by law.

Any release of claims must be drafted to comply with applicable law and must be reviewed by Legal before issuance. The severance agreement should clearly state: - The claims being released, to the extent permitted by law - Any claims that cannot be waived by law - The consideration provided in exchange for the release - The effective date of the agreement and revocation period, if applicable - The employee’s obligation to consult with counsel before signing - Any continuing obligations after separation The agreement must not require the employee to waive rights that cannot legally be waived, including rights to file charges with or cooperate with government agencies where protected by law. The agreement should also include a clear statement that nothing in the agreement prohibits protected concerted activity under NLRA Section 7 or other legally protected activity.

For employees age 40 and older, any waiver of age discrimination claims must satisfy the Older Workers Benefit Protection Act (OWBPA), 29 U.S.C. § 626(f). The severance process must include, at a minimum: - A written agreement that is understandable and specific - A clear reference to ADEA rights being waived - Consideration beyond anything of value already owed to the employee - Advice to consult with an attorney before signing - At least 21 days to consider the agreement for an individual termination, or 45 days for a group termination program, if applicable - A 7-day revocation period after signing - For group terminations, written disclosure of the decisional unit, eligibility factors, and job titles and ages of individuals eligible and not eligible for the program, as required by law No employee may be pressured to sign before the end of the applicable consideration period. HR must track deadlines and confirm that the agreement is not implemented until the revocation period expires.

Confidentiality provisions may be included to protect proprietary business information, trade secrets, and the terms of the severance agreement, subject to applicable law. Any confidentiality or non-disparagement language must be reviewed to ensure it does not unlawfully restrict: - Protected concerted activity under the NLRA - Reporting to or cooperating with government agencies - Whistleblower rights under applicable law - Other non-waivable employee rights California employees: confidentiality and non-disparagement provisions must be reviewed for compliance with California law, including restrictions that may apply to settlement agreements and workplace claims. The agreement should state that the employee may disclose the agreement as permitted by law, to legal counsel, tax advisors, immediate family members where appropriate, and government agencies.

The separation package should specify the treatment of benefits and final compensation, including: - Final wages and timing of payment in accordance with applicable state wage payment laws - Continuation or termination of health benefits, including COBRA notices where applicable - Treatment of equity, retirement, or deferred compensation benefits under the governing plan documents - Return deadlines for laptops, badges, documents, keys, mobile devices, and other company property - Access termination timing for systems, email, and facilities Final pay obligations may not be delayed pending execution of a severance agreement unless permitted by law. Any deductions from final pay must be reviewed for compliance with wage and hour laws and written authorization requirements.

- **Policy holder:** Maintains this policy, approves standard severance formulas, and ensures periodic review with Legal. - **HR Business Partner:** Documents the separation reason, confirms eligibility, coordinates employee communications, and tracks deadlines. - **Legal:** Reviews release language, OWBPA disclosures, confidentiality terms, and jurisdiction-specific requirements. - **Manager:** Provides business rationale for the separation and supports return-of-property and transition planning. - **Payroll:** Processes severance payments, final wages, and tax withholding in accordance with approved instructions.

Any deviation from this policy must be approved in writing by the policy holder and Legal and documented with the business justification. Failure to follow this policy may result in delayed payments, invalid or unenforceable agreement terms, corrective action, or disciplinary measures for employees or managers who knowingly bypass required review steps. This policy does not limit any employee rights under applicable law, including rights related to wage claims, discrimination claims, leave rights, or protected activity.

This policy must be reviewed at least annually and whenever there is a material change in federal, state, or local employment law, including changes affecting the ADEA, OWBPA, EEOC guidance, FLSA, or state wage payment and release requirements. Revisions must be approved by the policy holder, HR leadership, and Legal before publication. The version number and effective date must be updated with each revision.