Employment Law Commentary - Volume 28, Issue 2 - February 2016

Separation Anxiety: Best Practices for Employee Severance Agreements

Employers deal with employee separations all the time. Back when I was an HR manager for a major airline, when it came time for a layoff or other not-for-cause termination, most of the time I'd just pull the standard form separation agreement off the shelf, customize it a bit, and then work to get the employee to sign it. I confess that I never gave much thought to whether the separation agreement could ever be challenged, or worse, determined to be unenforceable.

Now I know better. While form agreements are certainly convenient, they can easily become outdated by failing to account for recent developments in the law. With the new year underway, now might be a good time to review your form separation agreements and decide whether a tweak or two is in order. Why now? Recently, the EEOC, SEC, and other government agencies have started to take a more aggressive stance on separation-agreement provisions—particularly those that are seen, at least from the agencies' points of view, as preventing or deterring employees from reporting employer wrongdoing.

For example, the EEOC has long taken the position that conditioning severance benefits on the employee's promise not to file an EEOC charge could constitute unlawful retaliation, in violation of federal employee-rights statutes.1 But in a recent shift, the EEOC has become even more strident in its enforcement efforts, and the agency has taken action against even those employers whose severance agreements expressly carve out restrictions on filing EEOC charges or participating in agency investigations. Courts have so far been reluctant to accept the EEOC's hawkish position. But with stepped-up enforcement actions on the rise, employers may do themselves a considerable disservice by relying on an outdated form agreement. Instead, it might be a good time to dust off the old agreements with an eye toward deciding whether saving the time and expense of defending an agency action outweighs the inconvenience of implementing a less restrictive separation agreement.

EEOC Guidance "Evolves"

Since at least 2009, the EEOC's position has been that, in the context of separation agreements, even those employees who agree to release all claims nevertheless should be allowed to file an EEOC charge and participate in agency proceedings. For example, the agency has said that severance agreement provisions that limit an employee's right "to testify...