What is an em­ploy­ment ter­mi­na­tion agreement?

The end of a working re­la­tion­ship can sometimes be an emotional time. This is normal in the face of change. However, unlike the process of quitting or firing someone, ter­mi­na­tion by mutual agreement can be an amicable way of ending a contract of work.

Unlike the structure of a good job reference, an em­ploy­ment ter­mi­na­tion agreement needs to follow state laws and reg­u­la­tions to be effective. Read on to see what the ad­van­tages and dis­ad­van­tages of ter­mi­na­tion by mutual agreement are.

An em­ploy­ment ter­mi­na­tion agreement is an arrange­ment which both sides, employer and employee, agree on to end a period of em­ploy­ment. Being fired, by contrast, is a one-sided decision. Similarly, if an employee decides to quit their job and hand in their notice they are making a one-sided decision. Even if the other party does not want to be fired or to lose an employee, quitting or being fired are effective ways to end em­ploy­ment without the other party agreeing to it. In contrast, a ter­mi­na­tion by mutual agreement only becomes effective if both parties agree on its terms.

As an al­ter­na­tive to being fired or quitting, both parties who signed an em­ploy­ment contract can also agree to terminate their em­ploy­ment re­la­tion­ship together with a ter­mi­na­tion agreement. This has several ad­van­tages for both parties involved.

Firstly, a ter­mi­na­tion agreement allows an employer to express their wish not to continue employing a person whom they cannot or do not want to employ for whatever reason, without creating an un­pleas­ant work en­vi­ron­ment. Although firing someone is necessary in some cases, it doesn’t allow for existing employees to feel as if their jobs are secure. Dis­cussing a ter­mi­na­tion of em­ploy­ment by mutual agreement means that your employees will feel more respected.

However, not only an employer benefits from this mutual agreement. Employees have more time to discuss their options and come to terms that suit them before leaving the workplace. A ter­mi­na­tion agreement gives employees time to work out their next job move. It is a less abrupt form of em­ploy­ment ter­mi­na­tion than being handed the notorious pink slip.

One of the dis­ad­van­tages for employers using a ter­mi­na­tion by mutual agreement is that it could take longer to sort out the ad­min­is­tra­tive details of letting someone go. This requires ad­di­tion­al resources such as time and staff to work out the details of an agreement.

Coming to an agreement with an employer is certainly better than being fired, but it could also be a long and drawn-out process for a member of staff. If an employee needs to leave work quickly or start a new job for whatever reason, the ne­go­ti­a­tions involved in drafting a ter­mi­na­tion by mutual agreement could take longer than handing in your notice in an ordinary manner.

Em­ploy­ment ter­mi­na­tion agree­ments are legal documents which should be drafted by someone who is qualified to do so. This may be a person within a company’s human resources or legal de­part­ment. Two important con­sid­er­a­tions to take into account when creating the agreement include: the time when an agreement becomes effective, and whether or not there is a so-called “cooling-off” period included in the contract.

Due to its nature of being an agreement, the terms can be specified and agreed upon by both parties, within reason. This may involve a ne­go­ti­a­tion process. If you have set a date within your agreement, that is when it becomes effective. There are always technical elements such as hand delivery or delivery by an agent which may trigger the agreement. It’s important to go through this with a qualified pro­fes­sion­al if you are in any way unsure. Any such aspects must be outlined in the agreement.

Part of most contracts is that you have a so-called “cooling-off period”. What this means is that you have the option to back out of your current contract, and re­con­sid­er your needs. You may be able to add terms or adjust others that do not suit your needs. This needs to be done within a specified period of time. You may be aware of such terms for other contracts like your phone or elec­tric­i­ty supplier, but some people are not aware that this is also the case for ter­mi­na­tion by mutual agreement.

Sadly, it is not as straight­for­ward as having a “one rule fits all” solution when it comes to a ter­mi­na­tion by mutual agreement. Different US states have different laws and ways of reg­u­lat­ing contracts. This means that even if you have ex­pe­ri­ence with ter­mi­na­tion by mutual agreement in the workplace, but have moved state, you may need to get legal counsel to ensure you are taking the right steps.

As mentioned above, the rules and reg­u­la­tions differ from state to state. If you are drawing up a ter­mi­na­tion agreement, you’ll have to bear in mind the specific nuances of a state’s laws to ensure that your agreement is effective and legal. That is why it would not make sense to provide a template for all states: some have the same and others have very specific re­quire­ments which need to be adjusted in­di­vid­u­al­ly. You may want to ensure that your boss gives you a job reference after ter­mi­na­tion. In general, the terms and con­di­tions of an employee’s departure should be made clear in a way that suits both parties. That is the nature of a ter­mi­na­tion contract by mutual agreement.

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