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 education and business experience. Also, the employer must give the employee enough time to read and consider the advantages and disadvantages of the agreement prior to signing it.
These are all factors a court would consider when determining whether a severance agreement was valid.