Drafting a Termination Agreement: An Overview

The decision to terminate an employment contract or a business relationship can be a difficult and emotional one. However, it is essential to ensure that the termination process is handled professionally and legally to avoid any potential disputes or legal complications in the future. One of the primary tools used in this process is a termination agreement.

A termination agreement, also known as a severance agreement, is a legally binding document that outlines the terms and conditions of the termination. It serves as a final agreement between the parties involved, and once signed, it typically prevents any further legal action or claims related to the termination. Here are some key elements to consider as you draft a termination agreement.

1. The Parties Involved

The first element to include in a termination agreement is the identification of the parties involved. This includes the employer and the employee or the parties to the business relationship. It should include the legal entity names, addresses, and any other relevant information that will help identify the parties accurately. This information will be used throughout the agreement, so it is essential to ensure that it is accurate and up-to-date.

2. The Reason for Termination

Another critical element is to provide a clear and concise statement of the reason for the termination. This can include any relevant details related to the cause of the termination. It is essential to ensure that this section is specific and unambiguous to avoid any potential misunderstandings or disputes.

3. The Terms of the Termination

The terms of the termination should also be clearly outlined in the agreement. This includes the date of termination, any notice period required, and any compensation or benefits owed to the employee. It is essential to ensure that these terms align with any relevant employment laws or contractual agreements.

4. Confidentiality and Nondisclosure

A termination agreement should also address the issue of confidentiality and nondisclosure. This includes any confidential information that the employee may have had access to during their tenure of employment or business relationship. It is essential to include specific language that prohibits the employee from disclosing any confidential information to third parties or using it for personal gain.

5. Release of Claims

A release of claims is another critical element of a termination agreement. It ensures that the employee or business partner agrees not to file any legal claims or charges related to the termination. This includes any claims related to wrongful termination, discrimination, or harassment.

6. Governing Law and Jurisdiction

Finally, a termination agreement should also include a governing law and jurisdiction clause. This identifies the specific laws that will govern the interpretation of the agreement and any potential disputes that may arise. It also identifies the jurisdiction where any legal proceedings related to the agreement will take place.


Drafting a termination agreement requires careful consideration of all the elements discussed above. While it can be a complex process, it is essential to ensure that the agreement is legally binding and addresses all the necessary terms and conditions related to the termination. Employers and business owners should seek the guidance of experienced legal counsel to help draft a comprehensive termination agreement that protects their interests while ensuring compliance with all relevant legal requirements.