Often a business will offer an employee separation or severance pay when the employee is laid off or terminated. If the employee is not otherwise entitled to the severance pay (for example, under a union contract), it is prudent for the employer to obtain, in exchange for the severance benefits, a release from the employee of any and all claims the employee may have against the employer.
It is important that the agreement obtained from the employee be signed and that it contain the right language to effectively relieve the employer from any liability to the employee for matters that arose during the time the employee worked for the company, including any possible claims that arose out of termination of the employee’s employment, including, discrimination, wage and hour, overtime, retaliation, breach of contract, infliction of emotional distress and ERISA claims.
The following is an outline of the provisions that should be included in a separation agreement:
- A description of the severance pay and whether it is payable in installments or over time.
- A release of the employer under any and all employment laws plus a waiver of the right to bring suit or file claims against the employer. Note, that an employer cannot prohibit an employee from filing a claim with the Equal Employment Opportunity Commission (EEOC) but can prohibit an employee from receiving any financial gain in connection with that claim. This will, in most cases, be an effective disincentive to the employee filing a charge.
- A confirmation of any non-compete obligations.
- A requirement that the employee returns, or has returned, all of the employer’s property, together with a confirmation that the employee has destroyed any copies in his or her possession.
- A provision where the employee agrees not to disparage or say negative things about the employer.
- A prohibition against the employee applying for future employment with the employer. This provision is necessary to avoid retaliation claims if the employee applies for employment in the future and is not hired.
- Include appropriate rescission rights. Specific language is required under the federal Age Discrimination in Employment Act (ADEA) and the Minnesota Human Rights Act (MHRA).
- If the employee is over 40, additional ADEA language is required.
- If the employee is being let go as part of a layoff (involving more than just the one employee), and the employee is over 40, language is needed to identify the ages of those persons being let go.
- Injunctive relief and attorneys fees for breach.