“We follow our agreement guidelines to a T,” Palmeter
Waivers Lose Favor
Hammering out the details of severance packages has
always been a balancing act. It requires employers to
calculate both the direct cost of their policy as well as
indirect ones, such as the influence on morale that sever-
ance packages could have on the employees who remain
with the company. But the trickiest part is ensuring that
your agreement will pass legal muster, and that issue is
only getting thornier now that federal agencies are pay-
ing closer attention to employers’ severance policies.
Given the stepped-up enforcement climate, it’s more
important than ever that employers review their severance policies and consult legal counsel. Here is advice
for ensuring that your practices reflect the government’s
Be clear that you’re not asking employees to waive
their right to sue. Many companies have long conditioned severance on employees signing waivers in which
they agree not to litigate against them—but that option
has become a risky one. In the wake of the Baker &
Taylor ruling, HR professionals should ensure that
their severance agreements include prominent language
emphasizing that nothing in the agreement should be
interpreted as interfering with an employee’s right to
file a legal claim, Michaels advises.
Repeat and emphasize employees’ rights. The EEOC
surprised many when it sued pharmaceutical giant CVS
Caremark in 2012, arguing that the company’s severance agreement was overly broad and didn’t clearly
communicate that a former employee retains the right to
cooperate with government investigators. Even though
the severance policy included standard language that
‘You want to be careful
about giving different
severance terms when
McDermott Will & Emery
Severance Agreement Waivers: Tips for Avoiding Legal Headaches
Federal agencies are giving severance
agreements close scrutiny and coming
down hard on employers that either ask
workers to give up a legal right or that
interfere with the exercise of a legal
Here are some general do’s and
don’ts, but keep in mind that this is a
highly nuanced area of the law and that
policies are in flux. Always consult legal
counsel to be sure you get things right.
■ ■ Do keep it simple. According to
the Equal Employment Opportunity
Commission (EEOC), waivers must
be written in a manner that is “clear
and specific enough for the employee
to understand based on his education
and business experience.” (In a recent
employer lawsuit, the EEOC specifically
noted, and not in a good way, that the
company’s agreement was five single-
■ ■ Do provide employees with adequate time to consider a legal waiver.
■ ■ Do remember that special rules
apply when you terminate workers
ages 40 and older.
■ ■ Do encourage employees to talk to
a lawyer about the severance agreement. In union environments, include
a provision about employees’ right to
meet with their union.
■ ■ Do include language clarifying that
nothing in the agreement should be
interpreted as being unlawful.
■ ■ Do be consistent where circumstances are more or less similar. Offer
the same severance agreement to similarly situated employees.
■ ■ Don’t require employees to waive
their right to file a charge with a government agency or participate in a government investigation.
■ ■ Don’t require employees to consult
with you before filing a claim.
■ ■ Don’t try to prevent employees from
filing a legal claim after the waiver is
■ ■ Don’t require employees who file a
whistle-blower claim to forgo their right
to receive a monetary award.