Exit Agreement
What is a termination agreement / exit agreement?
A termination agreement is intended to terminate an employment relationship at the employer’s request without having to give notice. The employment relationship then ends solely through the conclusion of the termination agreement. A significant advantage for the employer is obvious: In the absence of a notice of termination, the employer does not have to fear that the employee will bring an action for protection against dismissal; the employer does not have to provide evidence of social justification in the action for protection against dismissal.
If the conclusion of a termination agreement is considered at all, all essential points relevant to the termination of an employment relationship should be regulated. These include, for example:
- Determination of the termination date
- Agreement on a release from work, which should be irrevocable
- Payment of a severance package
- Issuance of a qualified reference and - depending on the length of time until the termination date - an interim reference, including an assessment of performance and conduct as well as an overall evaluation
- Potential agreement of a so-called "sprinter clause" or "turbo clause"
- Clarification of whether and which bonus payments or other special payments from the past period or up to the termination date are still due
- Regulations on the further use of work equipment, such as computer, laptop, company cell phone, as well as the use of any company car
There are no statutory regulations on the above points, so that for an exit agreement the legal position and negotiating skills are decisive for how advantageously such exit agreement can be negotiated and structured as well.
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Winding up agreement
Caution with winding up agreements
Immediately after a notice of termination has been given, there is no reason to issue written declarations or confirmations at the employer’s request or even to conclude an agreement on the settlement or termination of the employment relationship.
The employer might ask you to sign a (cleverly formulated) confirmation in order to “settle the formalities”, which in fact though might contains a declaration by which the employee agrees to the dismissal or even waives the filing of an action for protection against dismissal. Even if such declarations may be contestable, the employee puts himself in a significantly worse legal position right from the start.
The same applies to a written agreement between employer and employee in the form of a so-called winding up agreement. Here, it is often suggested to the employee that, despite the loss of his or her job, he or she can at least still secure claims such as vacation compensation, the benevolent issue of references or continued salary payment during the notice period. At the same time, of course, the intention is to confirm that there is agreement on the termination of the employment relationship and/or that the filing of an action for protection against dismissal is waived.
Benefit?
If such a winding up agreement is presented to you for signature, keep in mind that you are entitled to the above-mentioned claims in any case and their confirmation therefore does not represent any special concession on the part of your employer. Unless an over-proportional severance payment is agreed at the same time – and even then the benefits and disadvantages would have to be carefully weighed up and examined – a settlement agreement will therefore generally be of no use to you.
Instead, you not only lose the opportunity to challenge the validity of the termination, but also run the risk that the employment agency will impose a lockout period of up to 12 weeks on you.
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