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a severance agreement is a contract between an employer and an employee that documents the rights and responsibilities of both parties in the event of job termination for the employer a severance agreement makes sure the employee agrees to the terms under which they were released from employment and helps ensure the employee will not be filing a wrongful termination lawsuit against the employer following their termination and for the employee a severance agreement provides a description of any payments or benefits that will be paid to them following termination you