Severance Agreements: Understanding the Waiver of Your Statutorily Protected Claims

Daniela Adao

In order to minimize the risk of potential litigation, one common practice by employers is to offer departing employees additional severance benefits in exchange for a waiver of rights and release of liability for all claims the employee may have against the employer. Such claims include those arising under federal or state and local laws protecting employees from employment discrimination.

A waiver of rights and release of claims in a Severance Agreement forms a contract between the employer and the departing employee that limits the employee’s rights to bring suit against the employer for matters arising out of the employment relationship. If an employee signs a Severance Agreement containing a waiver and release of claims and later files a lawsuit against the employer alleging discrimination, the employer will argue that the court should dismiss the case because the employee waived his right to sue by signing the agreement.

Even before addressing the validity of the employee’s discrimination claim, a court will first decide whether the Severance Agreement is valid. If the court determines that the agreement is valid, the employee will be deemed to have waived the right to bring suit, and the court will not even consider the employee’s discrimination claim. Because in most cases courts will enforce a signed agreement, it is extremely important that an employee understand the consequences of his actions to avoid waiving valuable claims that he may have against the employer.

Don’t Give Away Your Rights For Free

First, an employee should never sign a Severance Agreement unless he is satisfied with the employer’s offer. This is important because an employee should never relinquish a valuable right without obtaining something of value in return.

Read The Agreement Carefully Before Signing

Second, an employee must read the agreement carefully before signing it to make sure he understands the benefits he is getting and what he is giving up in return. As mentioned previously, a common provision in a Severance Agreement is a waiver of all claims against the employer. A waiver provision usually contains language stating: “The Employee completely releases the Employer and its directors, officers, employees, agents, from any and all claims, liabilities, and obligations, known and unknown, that arise out of the Employee’s employment including all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, etc.”

Seek Legal Advice If You Don’t Understand The Agreement

Third, speak to a lawyer before signing the agreement. In addition to a waiver and release of all claims, there are several additional clauses in most severance agreements that employees should be aware of. For instance, a severance agreement may also contain non-compete clauses prohibiting the employee from working for competing businesses. Often, an attorney can help employees negotiate an agreement to obtain additional compensation.

If you feel that you have suffered discrimination based on a protected category (Race, gender, age, disability, etc.), you should not sign away your legal rights in exchange for severance pay. If you have already signed a Severance Agreement but you believe that you signed a release under conditions of fraud, duress, or mistake, the agreement can possibly be rescinded in special cases if you act promptly. Although it is generally difficult to overturn a release, always consult a lawyer immediately if you believe you were coerced into signing one.

If you have been offered a Severance Agreement and you are not sure what to do, contact The Harman Firm, LLP. The firm can help you understand and negotiate your agreement. Similarly, if you believe you have been coerced into entering an agreement, The Harman Firm, LLP can help you fight the agreement to secure your legal rights.