Separation Agreement and General Release (Texas)

SEPARATION AGREEMENT AND GENERAL RELEASE

State of Texas

PRIVILEGED AND CONFIDENTIAL

IMPORTANT -- TEXAS NON-COMPETE LAW: Texas enforces non-competes only if they are ancillary to or part of an otherwise enforceable agreement at the time the agreement is made (Tex. Bus. & Com. Code § 15.50). The non-compete must contain reasonable limitations as to time, geographic area, and scope of activity. If unreasonable, Texas courts are required to reform the covenant rather than void it (§ 15.51). Additionally, Texas requires final pay within six (6) calendar days of discharge (Tex. Lab. Code § 61.014).

This Separation Agreement and General Release ("Agreement") is entered into by and between:

EMPLOYER: [________________________________] ("Company"), a [________________________________] organized under the laws of [________________________________], with its principal place of business at [________________________________]

EMPLOYEE: [________________________________] ("Employee"), an individual residing at [________________________________], Texas [____]

(Company and Employee are each a "Party" and collectively the "Parties.")

Date of Agreement: [__/__/____]

RECITALS

WHEREAS, Employee has been employed by Company in the position of [________________________________] since [__/__/____], working primarily in the State of Texas;

WHEREAS, the Parties have mutually agreed that Employee's employment shall end effective [__/__/____] (the "Separation Date");

WHEREAS, Company desires to provide separation benefits beyond what Employee is otherwise entitled to receive;

WHEREAS, Employee has been advised to consult with an attorney;

NOW, THEREFORE, in consideration of the mutual promises, the Parties agree as follows:

ARTICLE 1: SEPARATION OF EMPLOYMENT

1.1 Separation Date. Employment terminates effective the Separation Date.

1.2 Last Day of Work. [__/__/____].

1.3 Final Wages -- Texas Requirements (Texas Payday Law, Tex. Lab. Code Ch. 61).

(a) Discharged/Involuntary Termination (§ 61.014). If Employee is discharged (involuntary separation), Company shall pay all wages due no later than the sixth (6th) calendar day after the date of discharge.

(b) Voluntary Separation / Resignation (§ 61.014). If Employee voluntarily leaves employment, Company shall pay all wages due no later than the next regularly scheduled payday following the date of separation.

(c) Wages Defined (§ 61.001). "Wages" means compensation owed by an employer for labor or services rendered by an employee, whether computed on a time, task, piece, commission, or other basis. This includes salary, overtime, bonuses, and commissions that are "earned" under the terms of an agreement or Company policy.

(d) PTO/Vacation Payout. Texas does not require payout of accrued PTO/vacation by statute. However, if Company has a written policy or contract providing for payout, failure to pay constitutes a violation of the Texas Payday Law. Attach or cite the applicable policy terms. Amount (if applicable): $[________________________________].

(e) Commissions and Bonuses (§ 61.015). Commissions and bonuses are payable according to the terms of the written agreement or Company plan. State whether conditions to be "earned" have been met, and specify the amount and payment timing.

(f) Penalties and Enforcement. The Texas Workforce Commission (TWC) handles wage claims. An employer that fails to pay wages may be ordered to pay the wages due plus administrative penalties. Willful violations may result in additional penalties. There is no private cause of action under the Texas Payday Law; claims must be filed with the TWC.

(g) Wage Deductions. No deductions from final wages except those required by law (taxes, garnishments) or authorized by Employee's specific written wage deduction authorization under the Texas Payday Law. General authorizations are insufficient; the authorization must specify the deduction.

☐ Employee was discharged -- wages due within 6 calendar days
☐ Employee voluntarily resigned -- wages due by next regular payday

1.4 Expense Reimbursement. Within [____] days of the Separation Date.

ARTICLE 2: SEVERANCE CONSIDERATION

2.1 Severance Payment.

☐ Lump Sum: $[________________________________], less applicable withholdings, within [____] days following the Effective Date.

☐ Installments: $[________________________________] per [____], for [____] months.

2.2 Benefits Continuation.

☐ COBRA Subsidy: [____] months.
☐ Texas Continuation Coverage: Under Tex. Ins. Code § 1251.252, group health plan continuation is available for employees of employers with fewer than 20 employees, for up to 6 months (9 months for disabled individuals).
☐ Lump Sum: $[________________________________].

2.3 Outplacement. [________________________________]

2.4 Other Benefits. [________________________________]

2.5 Tax Treatment. Subject to applicable withholdings. (Note: Texas has no state income tax.)

2.6 Adequacy of Consideration. Exceeds amounts already owed.

ARTICLE 3: EQUITY, BONUS, AND OTHER COMPENSATION

3.1 Equity Awards. [________________________________]

3.2 Bonus/Commissions (Tex. Lab. Code § 61.015). Payable per the written plan or offer. Attach plan as Exhibit. State whether conditions to be "earned" are met: [________________________________]. Amount: $[________________________________]. Payment timing: [________________________________].

3.3 Section 409A. Compliance intended.

ARTICLE 4: GENERAL RELEASE OF CLAIMS

4.1 Employee Release. Employee hereby voluntarily, knowingly, and irrevocably releases and forever discharges the Released Parties from all claims, including but not limited to:

(a) Federal Statutes:

• Title VII, ADEA (subject to Article 6), ADA, Pregnant Workers Fairness Act (PWFA) (42 U.S.C. § 2000gg et seq.), FMLA, Equal Pay Act, GINA, USERRA, ERISA (excluding vested benefits), WARN Act, Section 1981, Sarbanes-Oxley, Dodd-Frank

(b) Texas Commission on Human Rights Act (TCHRA) (Tex. Lab. Code Ch. 21):

• The TCHRA prohibits employment discrimination based on race, color, disability, religion, sex (including pregnancy), national origin, age, and genetic information
• Enforced by the Texas Workforce Commission Civil Rights Division (TWC-CRD), formerly the Texas Commission on Human Rights
• Applies to employers with fifteen (15) or more employees (age discrimination: 20+ employees)
• Administrative complaints must be filed with the TWC-CRD within 180 days of the alleged discriminatory act (or 300 days if a charge is also filed with the EEOC)
• Civil actions may be filed in district court within 60 days of receiving a right-to-sue notice
• Remedies and Caps (Tex. Lab. Code § 21.2585): Back pay, compensatory damages, punitive damages (with caps mirroring Title VII based on employer size): $50,000 (15-100 employees); $100,000 (101-200); $200,000 (201-500); $300,000 (500+)
• Tex. Lab. Code § 21.055 -- Retaliation protections
• Sexual Harassment: The TCHRA covers sexual harassment claims; Tex. Lab. Code § 21.141 permits individual supervisor liability for sexual harassment
• 2021 Amendments (HB 21): Extended TCHRA protections to all employers with respect to sexual harassment claims (no minimum employee threshold)

(c) Other Texas Statutes:

• Texas Payday Law (Tex. Lab. Code Ch. 61)
• Texas Workers' Compensation Act (Tex. Lab. Code Ch. 401 et seq.) (excluding existing claims)
• Texas Anti-Retaliation Law (Tex. Lab. Code § 21.055; § 451.001)
• Texas Whistleblower Act (Tex. Gov't Code § 554.001 et seq., public employees only)
• Texas Sabine Pilot doctrine (common law whistleblower protection for at-will employees refusing to perform illegal acts)
• Tex. Civ. Prac. & Rem. Code Ch. 129C (disclosures regarding sexual abuse)

(d) Common Law Claims: Breach of contract, wrongful discharge (Sabine Pilot doctrine), tortious interference, defamation, fraud, intentional or negligent infliction of emotional distress, invasion of privacy, and all other Texas common law claims.

4.2 Standard Carve-Outs. This Release does NOT waive or release:

(a) Rights to enforce this Agreement;
(b) Post-signing claims;
(c) Vested ERISA benefits;
(d) Unemployment insurance benefits;
(e) Workers' compensation benefits (Tex. Lab. Code § 451.001 -- retaliatory discharge protections);
(f) Indemnification rights;
(g) Right to file or cooperate with the EEOC, NLRB, SEC, OSHA, TWC-CRD, TWC, or any governmental agency;
(h) NLRA Section 7 rights;
(i) Speak Out Act protections;
(j) Disclosures protected by Tex. Civ. Prac. & Rem. Code Ch. 129C (sexual abuse disclosures);
(k) Non-waivable rights.

4.3 Unknown Claims. Release covers known and unknown claims to the fullest extent permitted by Texas law.

4.4 Company Release. Standard mutual release with exceptions.

ARTICLE 5: DEFEND TRADE SECRETS ACT -- WHISTLEBLOWER IMMUNITY NOTICE

Pursuant to 18 U.S.C. § 1833(b):

"An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and solely for the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order."

ARTICLE 6: OWBPA / ADEA COMPLIANCE (EMPLOYEES AGE 40 AND OLDER)

6.1 Knowing and Voluntary Waiver. Per OWBPA, 29 U.S.C. § 626(f).

6.2 Consideration Period.

☐ Individual (21 days).

☐ Group Exit (45 days). Decisional unit disclosure: Exhibit A.

6.3 Revocation Period. Seven (7) calendar days. Written revocation to [________________________________]. Effective Date: eighth day.

6.4 Advice of Counsel. Employee is advised in writing to consult with an attorney.

6.5 No Waiver of Future Claims.

6.6 Additional Consideration.

ARTICLE 7: CONFIDENTIALITY, NON-DISPARAGEMENT, AND PROTECTED DISCLOSURES

7.1 Confidentiality. Standard terms with carve-outs.

7.2 Non-Disparagement (McLaren Macomb-Compliant).

(a) Mutual non-disparagement. (b) Company instructs senior leadership. (c) NLRA Section 7 Carve-Out (McLaren Macomb, 372 NLRB No. 58 (2023)). Nothing restricts Section 7 rights.

7.3 Protected Disclosures. Employee may:

(a) File with EEOC, NLRB, SEC, OSHA, TWC-CRD, TWC, or any agency;
(b) Cooperate with investigations;
(c) Testify truthfully;
(d) Engage in NLRA Section 7 activity;
(e) Make Speak Out Act and DTSA-protected disclosures;
(f) Make disclosures regarding sexual abuse per Tex. Civ. Prac. & Rem. Code Ch. 129C.

7.4 Confidential Business Information. Per existing agreements and Texas Uniform Trade Secrets Act (Tex. Civ. Prac. & Rem. Code Ch. 134A).

ARTICLE 8: RESTRICTIVE COVENANTS

8.1 Texas Non-Compete Law (Tex. Bus. & Com. Code § 15.50).

IMPORTANT -- TEXAS NON-COMPETE FRAMEWORK:

(a) "Ancillary to or Part of an Otherwise Enforceable Agreement" (§ 15.50(a)). A non-compete is enforceable only if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made. This means:
- There must be an independent, enforceable agreement (e.g., confidentiality agreement, stock option agreement, agreement providing access to trade secrets or confidential information)
- The consideration in the underlying agreement must give rise to the employer's interest in restraining competition
- The covenant must be designed to enforce the employee's return promise (e.g., obligation to keep confidential information confidential)
- Under Alex Sheshunoff Mgmt. Servs. v. Johnson, 209 S.W.3d 644 (Tex. 2006), the Texas Supreme Court clarified that the otherwise enforceable agreement need not be independent of the employment agreement itself -- an agreement to provide confidential information in exchange for a promise not to disclose it satisfies the statutory requirement

(b) Reasonableness (§ 15.50(a)). The non-compete must contain reasonable limitations as to:
- Time (typically 1-2 years)
- Geographic area (must be reasonably related to Company's business territory)
- Scope of activity (must be narrowly tailored to the activity that generates the competitive concern)

(c) Mandatory Reformation (§ 15.51). If a non-compete is found to be ancillary but contains unreasonable restrictions, the court shall reform the covenant to make it reasonable and enforceable. Texas courts are required to reform rather than void overbroad non-competes.

(d) Healthcare Professionals (§ 15.50(b)). Physician non-competes are subject to additional requirements, including a buy-out provision and a requirement to provide access to patient lists and records.

☐ No Non-Compete.
☐ Existing Non-Compete. Ancillary to: [________________________________] (identify the otherwise enforceable agreement). Duration: [____] months. Geographic scope: [________________________________]. Activity: [________________________________].
☐ New Non-Compete. Ancillary to the confidentiality and non-disclosure obligations in this Agreement. Duration: [____] months. Geographic scope: [________________________________].

8.2 Non-Solicitation. [________________________________] (Note: Non-solicitation agreements are also subject to § 15.50's "ancillary" requirement under Texas law.)

8.3 Existing NDAs/Invention Assignment. Survive per their terms.

8.4 No-Rehire. ☐ Applicable. ☐ Not applicable.

ARTICLE 9: RETURN OF COMPANY PROPERTY

9.1 Within [____] days, return all Company property.

9.2 No copies retained.

9.3 No deductions from final wages for unreturned property unless authorized by specific written wage-deduction authorization per the Texas Payday Law.

9.4 Transition. Cooperation for [____] days.

ARTICLE 10: DISPUTE RESOLUTION

10.1 Governing Law. Laws of the State of Texas.

10.2 Forum. State or federal courts in [________________________________] County, Texas.

10.3 Arbitration.

☐ Not applicable.

☐ Applicable. Administered by [________________________________] in [________________________________], Texas. Rules: ☐ AAA ☐ JAMS. Fee allocation: [________________________________]. Excluded: sexual assault/harassment claims (9 U.S.C. § 401 et seq.); NLRB charges; workers' comp; unemployment; agency filings; small claims court.

10.4 Jury Waiver. ☐ Mutual waiver. (Texas courts generally enforce knowing and voluntary jury waivers.) ☐ Not applicable.

ARTICLE 11: GENERAL PROVISIONS

11.1 Entire Agreement. 11.2 Amendments. 11.3 Severability. 11.4 Waiver. 11.5 Counterparts. Electronic signatures valid. 11.6 Successors and Assigns. 11.7 No Admission. 11.8 Section 409A.

ARTICLE 12: TEXAS-SPECIFIC COMPLIANCE CHECKLIST

☐ Final wages paid within 6 calendar days if discharged / next regular payday if voluntary (Tex. Lab. Code § 61.014)
☐ Final wages NOT conditioned on execution of this Agreement
☐ PTO/vacation payout per written Company policy; if promised, constitutes wages under Texas Payday Law
☐ Commissions/bonuses addressed per written plan (Tex. Lab. Code § 61.015)
☐ Wage deductions only with specific written authorization per Texas Payday Law
☐ TCHRA claims enumerated (Tex. Lab. Code Ch. 21) -- applies to 15+ employees (sexual harassment: all employers), 180-day filing deadline
☐ TCHRA compensatory/punitive damages caps noted (mirror Title VII)
☐ Individual liability for sexual harassment supervisors addressed (Tex. Lab. Code § 21.141)
☐ Non-compete compliance verified (Tex. Bus. & Com. Code § 15.50):
☐ Ancillary to an otherwise enforceable agreement identified
☐ Reasonable time, geographic, and scope limitations
☐ Healthcare professional requirements met (if applicable, § 15.50(b))
☐ Mandatory reformation acknowledged (§ 15.51)
☐ Tex. Civ. Prac. & Rem. Code Ch. 129C disclosures carve-out included
☐ No state income tax -- federal withholdings only
☐ OWBPA consideration period provided (21 or 45 days)
☐ 7-day ADEA revocation period provided
☐ Employee advised to consult an attorney
☐ DTSA whistleblower immunity notice included (18 U.S.C. § 1833(b))
☐ McLaren Macomb NLRA Section 7 carve-out included
☐ Speak Out Act protections preserved
☐ TWC-CRD filing rights preserved

ARTICLE 13: SIGNATURES

PLEASE READ THIS AGREEMENT CAREFULLY. IT CONTAINS A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS, INCLUDING CLAIMS UNDER THE TEXAS COMMISSION ON HUMAN RIGHTS ACT (TEX. LAB. CODE CH. 21).

EMPLOYER: Signature: _____________________________ Date: [__/__/____]

Name: [________________________________] Title: [________________________________]

EMPLOYEE: Signature: _____________________________ Date: [__/__/____]

Name: [________________________________]

EXHIBITS:

☐ Exhibit A -- OWBPA Decisional Unit Disclosure (if applicable)
☐ Exhibit B -- Severance Payment Schedule
☐ Exhibit C -- Non-Compete / Otherwise Enforceable Agreement (if applicable)
☐ Exhibit D -- Bonus/Commission Plan
☐ Exhibit E -- Reference Letter

Sources and References

• TCHRA: Tex. Lab. Code Ch. 21
• Texas Payday Law: Tex. Lab. Code Ch. 61
• Texas Final Pay: Tex. Lab. Code § 61.014
• Texas Non-Compete: Tex. Bus. & Com. Code § 15.50
• Texas Non-Compete Reformation: Tex. Bus. & Com. Code § 15.51
• TWC Civil Rights Division: TWC-CRD
• Alex Sheshunoff v. Johnson: 209 S.W.3d 644 (Tex. 2006)
• OWBPA: 29 U.S.C. § 626(f)
• DTSA: 18 U.S.C. § 1833(b)
• McLaren Macomb: 372 NLRB No. 58 (2023)

This template is provided for informational purposes only. Texas requires non-competes to be ancillary to an otherwise enforceable agreement and mandates judicial reformation of overbroad restrictions. Texas has no state income tax. Consult a qualified Texas attorney before use.

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