Separation with Less Agitation

Practical Law Legal Update 9-602-6886 (Approx. 7 pages)

Separation with Less Agitation

by Practical Law Labor & Employment

Law stated as of 04 Mar 2015 • USA (National/Federal)

Resources to assist lawyers in drafting and negotiating separation agreements. These resources highlight Practical Law content on the topic of separation agreements, including jurisdiction-neutral and state-specific standard documents, state content to aid in tailoring jurisdiction-neutral resources and best practices guidance.

Even in a good economy, employers regularly downsize and terminate employees. Savvy employers know that every termination decision brings with it a risk of litigation, and even sound termination decisions may wind up in court. One way employers can reduce their litigation risk is to create a separation and release of claims agreement.

Sometimes referred to as a waiver and release or severance agreement, a separation and release of claims agreement represents an employer's promise to a departing employee to provide certain consideration in exchange for the individual's promise not to sue. However, there are legal requirements limiting what can and cannot be included as part of that agreement, for example:

OWBPA requirements. The Older Workers Benefit Protection Act (OWBPA) requires that release agreements for terminations of employees that are 40 years old and over include certain additional information about the group of employees considered for termination, if any. Designed to help individuals selected for layoff determine whether older employees are disproportionately adversely impacted, it requires that:
- the release include specific language, including advising the employee to consult with counsel about the terms of the agreement;
- the employer provide the employee with appropriate time to consider the release of claims before signing (generally 21 days after the termination of one employee or 45 days after the termination of multiple employees, but this consideration period is waivable); and
- the employer provide the employee with at least seven days to revoke the release of claims after it is signed (this revocation period is not waivable).
No administrative charge waivers. Employers cannot require waiver of the right to file a discrimination charge with the Equal Employment Opportunity Commission (EEOC) or equivalent state agencies. Several circuit courts have held that an agreement seeking to waive an employee's future right to file a charge with the EEOC or to cooperate with the EEOC is likely unenforceable. To promote enforcement of the agreement, the employer's counsel should not include this waiver, and the employee's counsel should require that this kind of language be removed.
State law requirements. Many states prohibit employers from requiring waiver of certain kinds of claims. State law often prohibits waiver of workers' compensation and unemployment benefits claims. States may also prohibit the waiver of claims for certain wage and hour violations, military service discrimination or medical benefits. Counsel for both employers and employees should consult the applicable state law when drafting or negotiating the agreement (see Employment Claims in Release Agreements: State Q&A Tool.)

Practical Law offers many resources to assist counsel for both employers and employees in creating appropriate separation and release of claims agreements, including:

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