Handling Disputes Over Employment and Severance Agreements

Will a Severance Agreement Close or Open the Door to Litigation? Disputes over employment and severance agreements are certainly not what any employer has in mind. In fact, employers usually offer severance agreements as a means of avoiding litigation. Layoffs occur and may be necessary due to redundancy. Furthermore, a severance package is a generous way of compensating an employee while implementing layoffs. Employers should not underestimate the importance of working with an experienced employment law attorney when crafting severance agreements. Avoiding Disputes over Employment and Severance Agreements In most cases, a severance agreement includes a waiver of rights in return for compensation that exceeds the employee’s regular employment agreement. For example, the severance pay is in addition to accrued vacation pay. Payment may be in the form of a lump sum or spread out over a number of weeks. Typically, in a general release, the employee agrees that the severance is a final payment and is a settlement of any and all causes of action current, past or future. The agreement would state the employee is waiving rights under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act and the Americans with Disabilities Act. Will the Court Deem the Agreement Valid? While most employees do not challenge severance agreements, there are some who might. It is vital that the employer establish that the employee knowingly and voluntarily signed the agreement. Also, under Title VII, a valid agreement does not require the employee to waive future rights. The agreement must be written in a way that is clear, specific and understandable based on the employee’s...

New York Severance Agreements

The Perils of Poorly Drafted Severance Agreements On May 3rd, the New York State Supreme Court Appellate Division, First Department handed down a decision in the case of Johnson v. Lebanese American University (LAU) (You can read or download the decision from the court’s website here: www.courts.state.ny.us/courts/ad1/). The decision revived a lawsuit filed by a former employee of the University who alleged that he was unlawfully terminated because he is gay. At the time of his termination, the plaintiff was presented with a severance agreement, which included a release of claims against the university in exchange for payment of $4,651. The University successfully argued at the trial court level that the case should be dismissed because the employee had unequivocally released all possible legal claims by signing the release and accepting the payment after he was fired. Unfortunately for LAU, the Appellate Division reinstated the lawsuit, essentially finding, among other things, that the specific language of the release could be open to interpretation as to whether it was intended to cover the employee’s claims of discrimination. The appellate decision also found that there was a disputed question of fact as to whether the severance agreement payment constituted money to which the employee was already entitled. The decision highlights two of the many potential pitfalls employers can run into when trying to utilize and implement severance agreements without the assistance of experienced employment counsel: 1. The language of the release contained in the severance agreement MUST be carefully drafted to leave no doubt that it is intended to cover all possible claims that could later be asserted by the employee,...

New York Employment Law, Severance Agreements

The Perils of Poorly Drafted Severance Agreements Author: Nils C. Shillito, Stephen D. Hans & Associates, P.C. On May 3rd, the New York State Supreme Court Appellate Division, First Department handed down a decision in the case of Johnson v. Lebanese American University  (LAU) (You can read or download the decision from the court’s website here: www.courts.state.ny.us/courts/ad1/). The decision revived a lawsuit filed by a former employee of the University who alleged that he was unlawfully terminated because he is gay. At the time of his termination, the plaintiff was presented with a severance agreement, which included a release of claims against the University in exchange for payment of $4,651. The University successfully argued at the trial court level that the case should be dismissed because the employee had unequivocally released all possible legal claims by signing the release and accepting the payment after he was fired. Unfortunately for LAU, the Appellate Division reinstated the lawsuit, essentially finding, among other things, that the specific language of the release could be open to interpretation as to whether it was intended to cover the employee’s claims of discrimination. The appellate decision also found that there was a disputed question of fact as to whether the severance agreement payment constituted money to which the employee was already entitled. The decision highlights two of the many potential pitfalls employers can run into when trying to utilize and implement severance agreements without the assistance of experienced employment counsel: 1. The language of the release contained in the severance agreement MUST be carefully drafted to leave no doubt that it is intended to cover all...