Severance Packages and Releases: How to Avoid a Lawsuit

A preemptive strike in the business litigation world can sometimes prevent a costly lawsuit in the event your company needs to terminate a troublesome employee. The need to avoid the suit can arise from a variety of different reasons: perhaps management mishandled the worker’s training in some way, or the firing gives you enough cause for concern to want to avoid a judge and jury. A severance agreement can require that worker to give up their rights to file a claim against your business, but it’ll cost you. How much? Our lawyers explain the very delicate rules.

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Going Above and Beyond in Compensation

If your business normally offers a severance package to departing employees (forcibly or otherwise), the financial package you present to this particular worker must be of greater value. The reason for this requirement is that other employees leaving your company are not asked to give anything up, this worker is – the right to sue you for damages. This right has value, and you must exchange something in return for it. How much is that right worth? That depends on the employee and how much your company stands to lose if their suit is successful. Our attorneys can advise you more closely on this matter when you contact our law office.

Be Clear About Rights Waived

Language surrounding what rights the employee gives up by accepting the severance package must be clear and understood by all parties. The contractual agreement should state plainly that the worker forfeits the right to pursue claims arising from their employment relationship with your business. What you’re guarding against is future claims that the employee didn’t understand the agreement or what they were giving up when they signed it. Ambiguous language can void the contract altogether, leaving your assets vulnerable.

The age of your employee also factors into the kind of language the agreement must include. The Older Worker’s Benefits Protection Act governs these provisions for employees over 40 years old. For example, the severance agreement and release for an older worker requires a longer period to consider the contract as well as mandates legal advisement in writing. Yes, you have to tell them to hire an attorney.

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Never Coerce an Employee into Agreement

Coercion of any kind, including labeling the agreement as a ‘limited time offer,’ renders the agreement unenforceable in court. The employee must sign the severance agreement voluntarily and of their own free will. That means no threats or aggressive behavior, no tricks, or pressure-inducing incentives. Present them offer and allow them time to think it over – that’s the only legal path to a legally binding document that you can call upon later to avoid the courtroom.   

If your business is in the midst of an employment law or business contract dispute, our lawyers can help you straighten out those legal difficulties. Call us today to schedule your in-depth consultation where we’ll explain your legal options and work to develop the most effective path to resolve the issues currently facing your company.