Shakespeare once said that parting is such sweet sorrow. But when it comes to employment, some separations can be sweetly civil, while others end in painful sorrow because of legal disagreements.
What Is a Separation Agreement?
A separation agreement is a contract between the departing employee and former employer, which lays out the benefits the employee will receive in a severance package. These might include compensation, continued benefits, outplacement assistance, a letter of reference, and so on. In exchange, the employee usually has to sign a release: An agreement not to sue the employer for legal claims arising out of the employment relationship. If the employee has strong potential legal claims, the release will be quite valuable to the employer -- and the employee should be able to negotiate a significant severance package in exchange for it.
Validity of Agreements
Not all releases (also called waivers) are valid, however. According to the Equal Employment Opportunity Commission, a release of the right to sue an employer for discrimination is valid only if the employee knowingly and voluntarily consents to the waiver. And, a valid waiver should:
- offer some form of consideration or additional compensation in return for the waiver of the employee’s right to sue
- not force an employee to waive future rights, and
- comply with federal and state laws regulating waivers.
If the employee signed the separation agreement under duress, or because of fraud, coercion, or threats by the employer, the waiver is not knowingly and voluntarily and is invalid.
Even if an employee signs a valid waiver, the employee retains the right to testify, assist, or participate in an investigation, hearing, or proceeding conducted by the EEOC regarding the employer's violation of federal discrimination laws. If the waiver includes language giving up these rights, it will be held invalid and unenforceable.
An employer who wants an employee to waive rights under the Age Discrimination in Employment Act (ADEA) must follow some specific procedures intended to ensure that the waiver is knowing and voluntary. For more information on these special rules, see Waiving the Right to Sue for Age Discrimination.
Employee Rights
Employees should be wary when asked to sign any contract or agreement at the end of the employment relationship, especially if they might have a legitimate discrimination or harassment complaint. The best course is to consult with an employment attorney as soon as you are presented with a release -- before you sign it. An attorney can review the release and let you know exactly what you are agreeing to. Better yet, an attorney may be able to help you negotiate a better severance package in exchange for agreeing to the release.
