HR Minute

Caution Concerning Severance Agreements and Settlement Agreements

Many employers utilize standard severance and settlement agreements in order to resolve or release discrimination claims of employees. Most such agreements contain provisions designed to protect the employer against any claim filed by the employee after the date of the agreement. Recently, the EEOC has begun scrutinizing and litigating the enforceability of these agreements.

EEOC has attacked provisions in agreements which limit an employee’s right to file or participate in a charge or investigation. EEOC has determined that provisions relating to non-disparagement of the employer, nondisclosure of confidential information, and the release of all claims may be unlawful. According to EEOC, these types of provisions interfere with an employee’s right to invoke legal procedures which cannot be waived.

Of course, when an employer pays compensation for the release and settlement of claims, the employer does not want to be involved in further litigation. In order to attempt to avoid the EEOC’s scrutiny, employers should be careful to exclude or narrow provisions that prohibit participation by the employee with the EEOC and other government agencies.

Because the employee has already received compensation for the release and settlement of contested claims, the agreement may provide that the employee shall not be entitled to any relief or monies in connection with any action or investigation brought against the employer regardless of who files or initiates such complaint or proceeding. In other words, while the employee is not prohibited from participating in a government investigation, the employee is precluded from collecting any additional compensation related to such participation.

It may be a good time to review the provisions of settlement and severance agreements in order to ensure that they do not invite a challenge by EEOC, NLRB or other government agency.

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