When an executive leaves his company because he resigns, he is fired, or he is downsized, the executive may get a separation agreement that includes severance payments, restrictive covenants and many other provisions. The separation agreement may be also called a settlement agreement, a release agreement or a severance agreement. One provision that is usually in separation agreements is a waiver and release provision that requires one or both parties to agree not to bring claims or law suits against the other.
Waiver and Release Are Pretty Standard
Employers almost always have a waiver and release provision running in their favor in separation agreements. The employer’s obtaining a waiver and release from the departing employee is usually the major incentive for the employer to agree to give the employee a severance payment.
The departing executive should also insist upon having a provision that waives and releases the employer’s claims and causes of actions against the executive. The waiver and release provisions should be reciprocal and the waiver and release should cover any existing or potential and known and unknown claims or causes of action.
Kinds of Claims Covered
The release provision in favor of the employer is ordinarily quite lengthy and includes every possible claim or cause of action that the employee could bring or initiate against the employer. The employer’s waiver and release provision covers violations concerning employment contracts, employee handbooks, Fair Labor Standards Act, the Americans with Disabilities Act, the Employee Retirement Income Security Act, the Family Medical Leave Act, Age Discrimination in Employment Act, state minimum wage acts, state wage payment and collection acts, and so forth.
Kinds of Persons & Entities Covered
The release of the employer will also specifically discharge every entity and everybody associated with employer such as its subsidiaries, affiliates, directors, officers, administrators, employees, agents, attorneys, successors, assigns and each person acting in the name of or on behalf of employer.
The waiver and release provision can be made absolute and comprehensive as to private party causes of action, as opposed to any government initiated actions. Typical language used to ensure comprehensive application of the release can be something like the following: “It is the intention of the parties not to limit this release to claims arising out of or in the scope of Employee’s employment by Employer and to make this release as broad and as general as the law permits.”
Non-Waivable Claims and Carve Outs
Each party should have a clear understanding of any limitations of, or carve outs in, the waiver and release. If there are any limitations or carve outs, they should not be so vague and subjective that the complaining party can arbitrarily and capriciously file a claim or law suit, thus defeating the purpose of the waiver and release. There is something to be said for achieving finality of non-liability for the parties so that each of them can move on. However if one party, for example the employer, feels strongly that certain possible claims cannot be waived because of unanticipated bad publicity or regulatory scrutiny or strong moral imperatives, then that party should carve out the egregious claims, like malfeasance. Some claims cannot be legally be waived.
Typical language excluding non-waivable claims would be something like this: “Excluded from this waiver and release is any claim or right which cannot be waived by law, including all claims arising after the date of this Agreement and Employee’s worker’s compensation claim, the right to file a charge with or participate in an investigation conducted by an administrative agency, and the right to enforce this Agreement.”
So many waiver and release provisions have become boilerplate that many attorneys and clients do not scrutinize them as hard as they should. Each separation agreement may have different circumstances and its waiver and release language must be viewed anew and crafted to meet the exigencies of the parties’ employment relationship.