There are times when it makes sense to resolve an actual or potential employment law claim by paying something and getting a release from the employee. Paying severance in return for a release and waiver of claims isn’t unusual in connection with reductions in force, and sometimes it’s appropriate in an individual termination. One way or another, most human resources professionals and in-house counsel will, at some point, have occasion to use a release in connection with an employment matter.
Generally speaking, preparing a release for an employment matter isn’t a do-it-yourself project. Even lawyers, if they’re not employment lawyers, should be cautious. Employment statutes and the case law that interprets them have created all sorts of requirements for effective releases. Here are some general guidelines and reminders:
Use plain language. Employment laws require that releases be “knowing and voluntary.” If a release is full of legal jargon and complicated language, it is less likely to be enforced by the courts and the employee may be allowed to pursue the claim that the release was meant to avoid. Courts will consider the employee’s level of education and business experience when evaluating whether a release is clear enough to allow knowing and voluntary execution.
Specifically reference certain laws. Title VII, ADEA, the FLSA, and their state counterparts should be specifically mentioned in a release. General mention of “any and all claims” is probably not specific enough to create a knowing and voluntary waiver.
Pay attention to state law quirks. Some state employment laws give employees more rights than their federal counterparts. For example, under the Minnesota Human Rights Act, an employee who releases state discrimination claims must be given 15 days after signing the release to reconsider and revoke it. If the 15-day rescission period isn’t spelled out in the release, Minnesota Human Rights Act claims will not be effectively waived unless the claims have been filed with a court or agency. In California employment law releases, it’s necessary to include reference to Section 1542 of the California Civil Code so the release covers both known and unknown claims the employee may have. Be sure to review the state laws relevant to the claims you’re trying to get released, or you might end up paying severance or other consideration and getting very little for it.
Allow employees to contact the EEOC. A release of Title VII, ADEA, and other federal discrimination claims will not be effective if an employee is prohibited from contacting the EEOC by the terms of the release. Employers can require employees not to accept monetary recovery if the employee files a charge of discrimination, but no release, settlement, or severance agreement can lawfully prevent an employee from filing a charge or providing information to the EEOC.
Address Older Worker Benefit Protection Act issues. Employees who are over the age of 40 are afforded additional protections under the federal Older Worker Benefit Protection Act. When there is a “group termination” (meaning a termination of two or more) and the employer wants to get releases of ADEA claims, the OWBPA imposes very specific requirements. There are complicated notices that have to be given to affected employees, and employees have to be given extra time to decide whether or not to sign the release, in addition to being given the opportunity to rescind a release after it’s signed.
Remember that releases only look back. Releases are only effective for past claims. Employers sometimes ask employees to sign releases and then continue to work for a period of time. If something happens during that period that could form the basis for an employment claim, the release will not be effective. A second release, signed when the employee actually stops working, will be necessary to fully protect the employer. If an employer is required to give notice in advance of an employee’s last day (for example due to WARN Act requirements), then the employer should provide a draft release so the employee can see what it involves, and then present the official release on the last day of employment.
Never press for a decision. A release of employment claims signed under pressure is not likely to be upheld by a court. It’s never appropriate to threaten (or even suggest) that the amount of severance being offered will get smaller if the employee doesn’t sign quickly, or that a letter of reference or some other benefit will only be available if the employee signs quickly. For a release of some claims – including discrimination claims – to be effective, the employee has to be given an opportunity to consult with a lawyer before signing.
Employment disputes and claims are hard enough to deal with. If you decide that an agreement and release is the best way to proceed, be sure you get what you pay for. The only thing worse than facing a claim is facing a claim you thought you paid good money to get rid of. The highly complicated and technical requirements for employment releases are worth paying attention to in order to avoid that unhappy outcome.