After an
employee has been presented with a separation agreement, it is important to
consider the facts and circumstances which led to this event. Was the employer down-sizing or undergoing a
reorganization? If so, was the offering
of a separation agreement a natural consequence of down-sizing/reorganization
that was consistent with the employer’s policy?
Or, were the facts and circumstances leading up to a separation
agreement more nefarious? There are
reasons why an employer offers a separation agreement. Standard operating procedure? Or, an
efficient way to eliminate problems down the road. Either way, separation agreements are risk
management tools for the employer.
Risk is managed by the employee’s waiver of all claims he or she has or had against the employer. The waiver contained in a separation agreements are comprehensive. Below is some language that is typically contained in a separation agreement:
“The Employee releases the Company
from any and all actions, causes of action, suits, claims, debts, demands and
complaints whatsoever, in law or equity, that you ever had, now have, or may
have against any of the Company, which arise out of or relate to your
employment with Company, the termination of that employment, or any other
matter, including without limitation the violation of any federal, state or local
law, including without limitation Title VII of the Civil Rights Act of 1964, the
Americans with Disabilities Act of 1990, the Civil Rights Act of 1866, the
Civil Rights Act of 1991, the Equal Pay Act (“EPA”), the Age Discrimination in
Employment Act (“ADEA”), the Family Medical Leave Act (“FMLA”)”
Is the severance payment a “good deal”? The employee is giving up rights to file a claim for any cause of action that may arise out of the employment relationship. If there are any claims that could arise out of the employment relationship, what is the likelihood of success? Does the claim have merits? Is it a viable claim? And, what is the claim worth? This needs to be contrasted with what is offered in the severance agreement. If the severance agreement provides a payment for $5,000, it isn’t such a good deal if the employee is waiving potential claims that might be worth $25,000 or more. What types of claims could exist? Were there events that occurred during the employment relationship that violated one or more employment laws?
Were there
violations of the ADA or the FMLA? Are there potential discrimination
claims? Was the employee mis-classified
as an “exempt” under the Fair Labor Standards Act (“FLSA”)? Should the employee have been paid overtime
but did not receive overtime compensation because the employee was
mis-classified as “exempt”?
What is not contained in the separation agreement is just as important as what is contained. Should there be clauses in the agreement which extend certain protections such as a neutral reference, or waiver of a non-competition agreement? Most likely, the employer had an attorney draft the separation agreement. The employee should not allow himself/herself to be placed into an inferior bargaining position. Employment law attorneys are uniquely positioned to review the separation agreement to make sure that it offers adequate protection. As a third party, your attorney can effectively serve as an intermediary in the negotiation process. If the separation agreement is not a “good deal,” your attorney can assess the merits and strength of any underlying claims which are going to be waived, and advise if the severance is adequate. If the separation agreement under-compensates the employee, your attorney can negotiate on your behalf to achieve compensation which is commensurate with the strength of the claims that you are waiving.
