Avoiding Legal Pitfalls with Employee Severance Agreements and Releases
Over the past few years there have been numerous changes to the law regarding releases of liability in the employment context. Although releases are intended to limit the ability of a former employee to sue his or her employer, some areas of liability cannot be released. The United States Court of Appeals for the Fourth Circuit has outlined a few of these areas. As the law stands today, releases in severance agreements for the Family and Medical Leave Act and Fair Labor Standards Act (i.e. overtime claims) are not enforceable and language purporting to release these potential claims should not be included in a release agreement.
In addition, a release should not prohibit an employee from applying for re-employment or filing a charge of discrimination (however, the release may limit the type of recovery from a discrimination charge to non-monetary relief if drafted properly).
If the former employee is age 40 or over, special rules require the employee to have 21 days to consider the release and 7 days to revoke the release after he or she signs it. When more than one employee is being laid off at one time, more special rules apply, including a 45-day period for the employees to consider the release, and the release document must include:
Releases can be very useful documents for employers, but they are technical legal documents and should always be reviewed by an attorney to ensure they are enforceable.
Questions? Please call or e-mail either John M. Remy or Joel J. Borovsky at Jackson Lewis LLP (703) 821-2189; remyj@jacksonlewis.com or borovsky@jacksonlewis.com. With 35 offices throughout the U.S. and nearly 500 attorneys, Jackson Lewis is one of the largest law firms dedicated exclusively to representing management in workplace law and related litigation. This article is provided for informational purposes only. It is not intended as legal advice nor does it create an attorney/client relationship between Jackson Lewis LLP and any readers or recipients. Readers should consult counsel to discuss how these matters relate to their individual circumstances.
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When an employee is terminated or laid off, an employer will often consider paying the employee some amount of severance. When negotiating a severance agreement, it is always a good idea to negotiate a release of liability by the employee. Without a release of liability in a severance agreement, the employer is not receiving anything of value for its severance payment. An employee could accept a severance package and immediately sue his or her former employer. By including a release of liability in severance agreements, employers will protect themselves from claims by former employees. A poorly drafted release might not accomplish this goal and could leave employers exposed to litigation where they had previously thought they were protected. Without a properly drafted release, an employer could be paying for an unenforceable promise.| Issue 5 | May 2008 |
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