SEVERANCE AND MUTUAL RELEASE AGREEMENT
[// GUIDANCE: This template is drafted for use with employees whose employment is terminating in the State of North Carolina. It is designed for compliance with federal law (including ADEA/OWBPA) and North Carolina contract principles. Customize all bracketed items and confirm statutory citations before execution.]
TABLE OF CONTENTS
- Document Header
- Definitions
- Operative Provisions
- Representations & Warranties
- Covenants & Restrictions
- Default & Remedies
- Risk Allocation
- Dispute Resolution
- General Provisions
- Execution Block
1. DOCUMENT HEADER
This Severance and Mutual Release Agreement (this “Agreement”) is made and entered into as of [EFFECTIVE DATE] (the “Signing Date”) by and between [EMPLOYER LEGAL NAME], a [STATE OF INCORPORATION] [corporation/limited liability company] with its principal place of business at [ADDRESS] (“Employer”), and [EMPLOYEE NAME], residing at [ADDRESS] (“Employee”). Employer and Employee are collectively referred to as the “Parties” and individually as a “Party.”
Recitals
A. Employee’s employment with Employer will terminate effective as of [TERMINATION DATE] (the “Termination Date”).
B. Employer desires to provide, and Employee desires to accept, certain severance benefits conditioned on Employee’s execution (and non-revocation) of this Agreement.
C. The Parties intend this Agreement to effect a full and final settlement of all matters between them, including a mutual release of claims, in accordance with applicable federal and North Carolina law.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and other good and valuable consideration, the sufficiency of which is acknowledged, the Parties agree as follows:
2. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings set forth below. Capitalized terms used but not defined elsewhere in this Agreement shall have the meanings given to them in this Section 2.
“ADEA” means the federal Age Discrimination in Employment Act of 1967, as amended.
“ADEA Waiver Effective Date” has the meaning set forth in Section 3.6(a).
“Agreement” has the meaning set forth in the preamble.
“Claims” means any and all actions, causes of action, suits, debts, dues, sums of money, accounts, controversies, agreements, promises, damages, judgments, executions, demands, liabilities, obligations, costs, expenses, attorneys’ fees, and rights of any nature whatsoever, whether known or unknown, asserted or unasserted, fixed or contingent, in law or equity, which a releasing Party ever had, now has, or may have through the Execution Date, arising out of or relating to Employee’s employment or its termination.
“Confidential Information” means all non-public information belonging to Employer, whether verbal, written, electronic or otherwise, including trade secrets and proprietary business information.
“Consideration Period” has the meaning set forth in Section 3.6.
“Effective Date” means the date this Agreement becomes irrevocably effective pursuant to Section 3.6.
“Employer Group” means Employer, its parents, subsidiaries, affiliates, predecessors, successors, assigns, and all of their current or former directors, officers, employees, agents and representatives, in their official and individual capacities.
“Employee Group” means Employee and Employee’s heirs, executors, administrators, assigns, dependents, spouse, and estate.
“Release” means the mutual release of Claims set forth in Section 7.1.
“Severance Benefits” has the meaning set forth in Section 3.2.
“Severance Cap” has the meaning set forth in Section 7.3.
3. OPERATIVE PROVISIONS
3.1 Separation of Employment
(a) Employment Termination. Employee’s employment with Employer shall terminate on the Termination Date.
(b) Final Compensation. On or before the next regular payroll date following the Termination Date, Employer shall pay Employee all earned but unpaid wages, accrued but unused vacation (if applicable), and any other amounts due under state or federal law (collectively, “Final Compensation”).
3.2 Severance Consideration
Subject to (i) Employee’s timely execution and non-revocation of this Agreement and (ii) Employee’s continued compliance with its terms, Employer shall provide the following consideration (collectively, the “Severance Benefits”):
1. Severance Pay: A lump-sum payment of $[SEVERANCE AMOUNT], less all required withholdings, payable on the first administratively-feasible payroll date after the Effective Date.
2. COBRA Subsidy: Employer shall reimburse Employee for the employer-share of COBRA premiums for [NUMBER] months following the Termination Date, subject to timely COBRA election.
3. Outplacement: Employer shall provide up to [DOLLAR AMOUNT] of outplacement services through a provider of Employer’s choosing, to be used within [TIME FRAME].
[// GUIDANCE: Delete or modify any benefits not offered.]
3.3 Taxes and Withholding
All payments under this Agreement will be subject to applicable tax withholding. Employer makes no representation concerning the tax consequences of any payment hereunder and Employee acknowledges sole responsibility for any taxes that may be due.
3.4 Return of Property
No later than the Termination Date (or promptly upon discovery thereafter), Employee shall return to Employer all Employer property, including keys, credit cards, computers, mobile devices, documents, and Confidential Information.
3.5 Ongoing Cooperation
Employee shall reasonably cooperate with Employer in any transition matters and in the defense or prosecution of any claims relating to periods of Employee’s employment. Employer shall reimburse reasonable out-of-pocket expenses incurred in providing such cooperation.
3.6 ADEA/OWBPA Compliance
(a) Consideration Period. Because Employee is [UNDER/OVER] the age of forty (40), Employee is entitled to [21/45] calendar days (the “Consideration Period”) in which to consider this Agreement before signing. Employee may sign sooner but is not required to do so.
(b) Revocation. Employee may revoke signature within seven (7) calendar days after signing by delivering written notice to [EMPLOYER CONTACT].
(c) Effective Date. This Agreement shall become effective on the eighth (8th) calendar day after Employee signs, provided Employee has not revoked (the “ADEA Waiver Effective Date”).
(d) Acknowledgments. By signing, Employee acknowledges:
i. This Agreement is written in a manner calculated to be understood.
ii. This Agreement specifically refers to rights under the ADEA.
iii. Employee is advised in writing to consult with an attorney.
iv. Employee receives consideration in addition to anything of value already owed.
[// GUIDANCE: Use 45-day consideration period only for terminations in connection with an exit incentive or other employment termination program, and attach required “decisional unit” disclosures.]
3.7 Conditions Precedent
Employer shall have no obligation to provide Severance Benefits until (i) Employee delivers a signed copy of this Agreement after the Consideration Period and (ii) the revocation period expires without revocation.
4. REPRESENTATIONS & WARRANTIES
4.1 Mutual Authority. Each Party represents that it has full authority to execute and deliver this Agreement and to carry out its terms.
4.2 Employee Representations.
(a) No Filed Claims. Employee has not filed any Claims against Employer with any court or governmental agency that have not been withdrawn or dismissed.
(b) No Reliance. Employee enters this Agreement voluntarily and without reliance on any representation not expressly contained herein.
(c) Material Breach. Any material misrepresentation by Employee shall constitute a breach under Section 6.1.
4.3 Survival. The representations and warranties of this Section 4 shall survive the Effective Date.
5. COVENANTS & RESTRICTIONS
5.1 Confidentiality of Employer Information. Employee shall not disclose or use any Confidential Information except as required by law or with Employer’s prior written consent.
5.2 Confidentiality of Agreement. Employee shall keep the terms of this Agreement confidential except (i) to Employee’s immediate family, legal counsel, or tax advisors, each under similar confidentiality obligations, or (ii) as required by law.
5.3 Non-Disparagement. Neither Party shall make any statement that could reasonably be expected to disparage or harm the reputation of the other Party or any member of the other Party’s Group. Nothing herein shall prohibit truthful testimony or statements required by law.
5.4 Protected Activity. Nothing in this Agreement limits Employee from filing a charge or complaint with, or otherwise communicating or cooperating with, the Equal Employment Opportunity Commission (EEOC), the National Labor Relations Board (NLRB), the Securities and Exchange Commission (SEC), or any other governmental agency. However, Employee waives the right to recover monetary damages or other individual relief from Employer based on such agency proceedings, except where such waiver is prohibited by law.
5.5 Post-Termination Restrictive Covenants. [INCLUDE any non-competition or non-solicitation provisions or reference to existing agreements, e.g., “Employee acknowledges and reaffirms the Continuing Obligations under the Non-Competition Agreement dated [DATE].”]
6. DEFAULT & REMEDIES
6.1 Employee Breach. In the event of Employee’s material breach of Sections 5 or 7, Employer may (a) cease any unpaid Severance Benefits and (b) pursue recovery of any Severance Benefits already paid, subject to applicable law.
6.2 Employer Breach. If Employer fails to pay Severance Benefits when due, Employee shall provide written notice and a ten (10) day opportunity to cure. If the breach remains uncured, Employee may pursue all remedies at law or in equity.
6.3 Attorneys’ Fees. The prevailing Party in any action to enforce this Agreement shall be entitled to reasonable attorneys’ fees, costs, and expenses.
7. RISK ALLOCATION
7.1 Mutual Release of Claims
(a) Employee Release. For valuable consideration, Employee, on behalf of Employee Group, irrevocably releases and forever discharges Employer Group from all Claims, including those arising under Title VII of the Civil Rights Act, the Americans with Disabilities Act, the ADEA (consistent with 29 U.S.C. § 626(f)), the Family and Medical Leave Act, the North Carolina Equal Employment Practices Act, and any other federal, state, or local statute, regulation, or common law through the Execution Date, except for (i) rights created by or preserved in this Agreement, (ii) vested retirement benefits, (iii) unemployment or workers’ compensation benefits, and (iv) claims that cannot be waived as a matter of law.
(b) Employer Release. Employer, on behalf of Employer Group, releases Employee Group from all Claims relating to Employee’s employment through the Execution Date, except (i) rights created by or preserved in this Agreement, (ii) claims arising from Employee’s willful misconduct or fraud discovered after the Effective Date, and (iii) claims that cannot be waived as a matter of law.
7.2 Indemnification. Each Party agrees to indemnify, defend, and hold harmless the other Party from any breach of that Party’s respective representations, warranties, and covenants herein. [// GUIDANCE: Indemnification is mutual but intentionally narrow; broaden or narrow per client preference.]
7.3 Limitation of Liability
Notwithstanding any provision herein, EACH PARTY’S TOTAL LIABILITY FOR BREACH OF THIS AGREEMENT SHALL NOT EXCEED THE AGGREGATE SEVERANCE BENEFITS PAID OR PAYABLE (the “Severance Cap”), EXCEPT FOR LIABILITY ARISING FROM (i) A PARTY’S INTENTIONAL MISCONDUCT, (ii) A BREACH OF CONFIDENTIALITY OBLIGATIONS, OR (iii) CLAIMS NOT SUBJECT TO RELEASE UNDER SECTION 7.1.
7.4 Force Majeure
Neither Party shall be liable for failure to perform any obligation (other than payment obligations) if such failure is caused by events beyond reasonable control, including natural disasters, acts of terrorism, or governmental actions.
8. DISPUTE RESOLUTION
8.1 Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina and, where applicable, federal employment law, without regard to conflict-of-law principles.
8.2 Forum Selection
Subject to Section 8.3, the Parties consent to the exclusive jurisdiction of the state and federal courts located in [COUNTY], North Carolina for any action arising out of or relating to this Agreement.
8.3 Optional Arbitration
[OPTION 1 – OMIT ENTIRELY]
[OPTION 2 – INSERT]
“If either Party elects, by written notice within thirty (30) days after a dispute arises, any controversy arising out of or relating to this Agreement shall be settled by final and binding arbitration administered by the American Arbitration Association under its Employment Arbitration Rules. Judgment on the award may be entered in any court of competent jurisdiction.”
[// GUIDANCE: Delete 8.3 if Parties do not choose arbitration.]
8.4 Jury Trial Waiver
[INCLUDE or OMIT per metadata]
“THE PARTIES HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY.”
8.5 Injunctive Relief
The Parties acknowledge that a breach of Section 5 may cause irreparable harm. Subject to Section 7.3, either Party may seek limited injunctive relief to enforce Section 5, provided that any such relief shall be narrowly tailored and shall not exceed what is reasonably necessary to protect legitimate interests.
9. GENERAL PROVISIONS
9.1 Entire Agreement. This Agreement constitutes the complete and exclusive statement of the agreement between the Parties with respect to its subject matter and supersedes all prior negotiations and agreements.
9.2 Amendment and Waiver. No amendment or waiver of any provision of this Agreement shall be effective unless in writing and signed by both Parties. A waiver on one occasion shall not constitute a waiver on any future occasion.
9.3 Assignment. Employee may not assign or delegate any rights or obligations under this Agreement. Employer may assign this Agreement to any successor by merger, consolidation, or asset transfer.
9.4 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.
9.5 Severability. If any provision of this Agreement is held to be invalid or unenforceable, such provision shall be reformed to the minimum extent necessary to render it enforceable, and the remaining provisions shall remain in full force and effect.
9.6 Counterparts; Electronic Signatures. This Agreement may be executed in one or more counterparts (including via electronic signature or facsimile), each of which shall be deemed an original and all of which together shall constitute one instrument.
9.7 Headings. Headings are for reference only and shall not affect interpretation.
10. EXECUTION BLOCK
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the dates set forth below.
| Employer | Employee |
|---|---|
| [EMPLOYER LEGAL NAME] | [EMPLOYEE NAME] |
| By: _______ | _______ |
| Name: [AUTHORIZED SIGNATORY] | |
| Title: [TITLE] | |
| Date: _____ | Date: _______ |
[OPTIONAL NOTARY ACKNOWLEDGMENT – North Carolina]
State of North Carolina
County of _______
I, ____, a Notary Public for said County and State, certify that ______ personally appeared before me this day, acknowledged due execution of the foregoing instrument, and swore that the statements herein are true.
Witness my hand and official seal, this ___ day of __, 20.
Notary Public
My Commission Expires: _______
[// GUIDANCE:
1. Verify compliance with 29 U.S.C. § 626(f) (OWBPA) before execution.
2. If part of an exit incentive/group termination, attach required unit-level demographic disclosures.
3. Confirm no state-specific notice or statutory payment timing laws are triggered.
4. Review restrictive covenants to ensure they comply with current NC public policy and statutory amendments (e.g., COVID-19 public health emergency carve-outs, if applicable).
5. Maintain executed copies for a minimum of six (6) years to satisfy potential ADEA record-keeping requirements.]