 |
|
HR Hot Topics |
Severance Agreements
Essentially, the idea behind a severance agreement is that the employee agrees to take something of value to which he is not otherwise entitled — additional compensation, benefits, or other “in kind” consideration — in exchange for agreeing not to sue you. Unfortunately, even a totally justified, squeaky-clean termination isn’t bulletproof 100% of the time. An employee determined enough to sue you will do so, and you’ll end up spending a good chunk of change defending even a borderline meritless claim. That’s where the severance agreement comes in. A severance agreement that includes a full release of claims is the only way you can be reasonably sure you won’t be dealing with the individual again. Of course, peace of mind has a price. Related articles on Severance Agreements The risk factors of a termination need to be evaluated to determine whether a severance agreement is worth the expense. Is the employee in a protected category (more significant, is she likely to be replaced by someone not in the same protected category)? Has the employee recently engaged in protected activity such as taking leave under the Family and Medical Leave Act or filing a workers’ compensation claim? Is there an employment contract in the picture? When there are complicating factors, the release is probably worth more to the employer than a run-of-the-mill “at-will” termination. Also, the nature of the employee’s misdeeds needs to be taken into account. For example, it’s probably not beneficial to offer a severance agreement to an employee who has been caught stealing, engaged in insubordination or workplace violence, or committed some form of harassment, even if he is in a protected category or seems like a high risk to sue. Employers need to set a precedent in such matters. If it becomes known that employees who engage in egregious behavior are essentially “paid off” on their way out the door, overall workplace conduct and morale are likely to be affected. Indeed, an employer can even appear to be complicit in the employee’s bad behavior in such situations. The other thing about severance agreements is you can’t force employees to sign them. All you can do is offer. And sometimes, an employee who never had a thought in the world about suing starts to think about things differently once he sees the agreement. He may look at the list of claims in the release and wonder if any apply to him. He may wonder why his employer took all the trouble to pay an attorney to draft such a nice, official document if they weren’t worried about something. And remember, for the agreement to be enforceable, the employee must be given a reasonable amount of time to consider it. To obtain an enforceable release of age discrimination claims under federal law, an employee must be given 21, or sometimes even 45, days to consider the agreement — so he’ll have time to talk to his spouse or his friend’s son (who’s a lawyer) and probably get even more ideas and encouragement.
Related articles on Severance Agreements from the State Employment Law Letters
|
designates additional valuable resources available exclusively to Employment Law Letter subscribers