BY G. A. FINCH
“A covenant not to sue” as the term suggests is a legal promise not to file a lawsuit. It is usually a companion provision to releases and waivers in a release agreement. Releases and waivers are de rigueur in employment separation/severance agreements. Lawyers drafting separation/severance agreements favor including a covenant not sue because it can be raised as an affirmative defense in litigation if the party giving the covenant not to sue then decides subsequently to file a lawsuit.
As the employer’s attorney is the person that usually does the initial draft of a separation agreement, the covenant not to sue is a provision that an employee reflexively gives to an employer without much thought and not vice versa. When I represent the employee, I negotiate for the covenant not to sue be mutual, i.e., what is good for the goose is good for the gander.
If the employer requires peace of mind that the separation agreement will prevent future controversies, so should the employee have the same.
In a separation/severance agreement, a covenant not to sue is subject to certain limitations and exceptions concerning 1) an employee’s ability to file administrative charges with the Equal Opportunity Commission and corresponding state or local agency, 2) an employee’s ability to file a lawsuit to challenge whether the employee signed the agreement knowingly and voluntarily for purposes of the Age Discrimination in Employment Act, 3) an employee’s ability to being a witness in a class action suit against the employer, or 4) an employee’s ability to waive a right which waiver is prohibited by law.
Final points: Although releases and covenants to not sue are usually set out together in a separation/ release agreement, there is a subtle difference between them. A release gives up or relinquishes a right to enforce a right or a claim that could have been enforced while a covenant not to sue is an agreement not to assert a right to bring a cause of action in court. Put another way, a release extinguishes a right and a covenant not to sue does not allow a right to proceed to litigation. A permanent or perpetual covenant not to sue, as opposed to a set time limit not to sue, has the same effect as a release or discharge.
This may be too much information for the typical executive to know or care about. The important thing to remember is to make reciprocal both releases and covenants not to sue.