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Termination of Disgruntled Employees

Categories: Employment Matters

signing severance agreement

How To Deal With Disgruntled Employees Upon Termination

One of the biggest risks to any business is that a former employee either is or will become disgruntled and seek a way to lash out at the prior employer, either through threats, lawsuits, online defamation, false reports of discrimination or harassment, or false claims of illegal activity at the company.  Whether the end of the employment relationship is instituted by the employer or the employee, and regardless of the employee’s seeming mood at the time of his or her departure, things can turn ugly quickly. While this article provides some general guidance, you should always seek legal guidance before preparing a severance agreement or even negotiating one.

What Is a Severance Agreement?

Purpose. One method to attempt to avoid ongoing conflict with the departing employee is to offer a severance agreement.  Such an agreement, like any other contract, has benefits and costs for both sides.  On the employer side, the cost is usually a monetary payment, perhaps in conjunction with a non-disparagement clause and an agreement regarding benefits, either unemployment or those provided by the company to its employees. The benefit is that the employee agrees not to sue the company, not to violate any terms of their employment contract, and not to defame or disparage the company in any way.

Sample Language:

WHEREAS, the Parties agree that this Agreement is a final settlement agreement and a general release of all claims and damages, and is a full and complete compromise and settlement of the Dispute…and that, by entering into this Agreement, neither Party admits to any liability or responsibility for any claim, act, or omission;

WHEREAS, Employee explicitly hereby disavows any known or unknown allegation of… acts or omissions or wrongdoing of any kind that Employee believes, explicitly or implicitly, could be related to the Dispute, the Business; and

WHEREAS, the Parties each represent and warrant that the above recitals are true and correct and are made a part of an incorporated into this Agreement for all purposes.

Mutual Release. The most important provision to include in a severance agreement from the company’s perspective is a full and complete release of all legal claims against the company that are allowed to be so released by federal or state law.  The release should specifically state that the employee received good and valuable consideration for releasing these claims and name as many specific types of claims as possible, while noting that the release includes but is not limited to these types of claims.  Common claims to list in the release, in addition to discrimination claims, are wrongful discharge, breach of contract, personal injury, worker’s compensation, equal pay, and other contract and tort claims.  The agreement may also provide that the person will not cooperate with any other employee in a private action against the company, voluntarily join any class action or institute a False Claims Act case. The latter, the False Claims Act action is among the most powerful claims an “insider” like a former employee can bring. Whether the allegations are true or false, the business owners, if not careful and well advised, may find themselves in year-long battles against the former employee acting with and on behalf of the United States federal government.

Sample Language:

In consideration of the foregoing recitals and mutual promises by the Parties and for other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, Employee for himself/herself and his/her … all do hereby compromise, settle, cancel, and fully release and forever discharge the Business together with its heirs, successors, assigns, executors, administrators, agents, attorneys, representatives, including any affiliated persons or entities, any other affiliated or related persons or entities, trusts, legal representatives, partners, subsidiaries, shareholders, members, directors, officers and employees (collectively, the “Business Released Parties”) from any and all controversies, promises, actions, claims, grievances, proceedings of any kind, complaints, charges, debts, contributions of any kind, demands, obligations, liabilities, suits, contracts, liens, covenants, property or intellectual right interest, offsets, taxes, loans, allowances, payment of debts, advancements of any monies, remedies of any type, and causes of action of whatsoever nature or for any and all other damages of any kind whatsoever (all collectively referred to as “Claims”)…whether arising at law or…including, but not limited to, those arising out of or inuring or relating to (directly, indirectly, or impliedly) the Parties’ Dispute…

Integral Parts. Other common provisions that you may wish to include in a severance agreement include a date of termination, that the departure is voluntary, that neither side admits any liability, and that the agreement and all of its terms, including the amount of any severance payment, are voluntary.  In addition, you may wish to include an agreement that the employee has returned or will return all company property, that the employee will not defame or disparage the company, and that the employee will not use or disclose any confidential information he or she received as a result of their employment.  Finally, because you are asking the employee to release legal claims he or she may have against the company, you should include language that all such waivers are knowing and voluntary and that the employee had the opportunity to have the entire severance agreement reviewed by an attorney of their own choosing prior to agreeing to the terms and signing the document.

Enforceability of Severance Agreements

Enforceability. Note that there are some provisions that you might wish to include in a severance agreement that are unenforceable.  Some of these provisions could make the entire agreement void or voidable, leaving the employer out the severance payment with no valid protection from unfavorable actions by the employee.  Others could even reflect poorly on the employer, as a federal investigator or plaintiff’s attorney might view the attempt to include such provisions as an admission of guilt or an attempt by the company or its human resources department to hide illicit activities at the company.  In addition, the factual circumstances regarding the employment relationship are a crucially important element in drafting a valid, enforceable agreement.  Finally, federal and state laws impact the clauses that can and cannot be included in a severance agreement.

Restrictions. First, as noted, some things cannot be contracted away by the employee.  One of the most common requests by employers is to stop the employee from reporting any negative information about them to the federal, state, or local government, or even making public statements about the company in any forum.  Typically, such prior restraints on speech to the government are unenforceable.  For example, you cannot require your employee to give up their right to report discrimination to the EEOC or to refuse to cooperate with any EEOC investigation.  The employee can, however, agree not to file a discrimination lawsuit against the company and/or agree that he or she has not been discriminated against in any way.  Such an agreement can make a later complaint harder to sustain.  Note that special rules apply if the company is asking an employee who is forty or older to waive age discrimination claims. The statutory scheme for age discrimination has very specific requirements for the language of the waiver and rules for its enforceability that are different from those applicable to other types of discrimination.

Reporting Crimes. Further, a company cannot require or ask a former employee not to report suspected crimes or fraud that occurred during their tenure or require them not to speak to law enforcement agents. But a severance agreement may include a statement by the employee that he or she is either not aware of any illegal activity or that such activity was reported to the employer at the time the employee became aware of it.  Again, such a statement helps protect against an employee who decides weeks, months, or even years after their employment ends that they want to cause economic or other damage to the company by trying to retaliate against them for their perceived unfair treatment.

Protect Your Business: Ask for a Free Consultation

As you can see, there are many considerations in preparing a valid and enforceable severance agreement. If you need help negotiating or drafting a severance agreement with an employee who has either resigned voluntarily or is being laid off or terminated, you need experienced, qualified legal advice from attorneys with experience handling the end of employment relationships. The attorneys at Oberheiden, P.C. can assist you with transitioning an employee to a former employee while lessening the chances that the employee will turn negative or litigious.  All initial consultations are free and completely confidential. Call one of us today.

    Oberheiden, P.C.
    Compliance – Litigation – Defense
    (800) 810-0259
    (214) 469-9009
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    (714) 294-2000
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