5 Ways to Ensure that Employee Severance Agreements Are Enforceable

Business owners must understand federal and state employment laws and how they apply to their businesses, including those related to employee severance agreements. They also must be aware of the changes in laws and policies that continually occur and adapt their business practices accordingly. Taking a proactive approach to employment law-related matters often can help you avoid employment law-related problems before they arise. However, if you encounter an employment law dispute, you can rely on a Florida business law attorney at Kramer Green to represent your interests and reach an efficient and effective resolution.

Neither state nor federal law requires that employers offer severance pay to employees. Nonetheless, many employers offer severance packages to employees as compensation when their employment is terminated. Furthermore, if an employer chooses to include severance as part of an employee contract, it is enforceable by law. Severance packages may include monetary compensation and some benefits, such as extended health insurance coverage, retirement accounts, and stock options.

Although employee severance agreements may constitute a gesture of goodwill or an acknowledgment of long-term employment, they may require the employee to waive their right to sue their employer over employment-related disputes. Here are five ways to ensure your employee severance agreement is legally valid and enforceable.

  1. Employee severance agreements must offer a benefit over and above any to which the employee is already entitled.

    An employer cannot require employees to sign a severance agreement, including a release of all claims against it, as a condition of receiving their final pay for hours worked. Likewise, an employer cannot require employees to sign a waiver of claim in exchange for them to exercise their rights to extend medical insurance coverage under COBRA.

  2. If the employee is over 40 years old, the Older Workers Benefits Protection Act (OWBPA) applies.

    The OWBPA is part of the Age Discrimination in Employment Act (ADEA), which requires employers to include certain provisions in employee severance agreements to secure a legally valid, knowing, and voluntary release of age discrimination-related claims by employees. Under 29 U.S. Code §626(f), the agreement must contain the following requirements:

    1. It must be written in plain language that an average person can understand.
    2. It must be made in exchange for consideration that is in addition to something of value to which the employee is already entitled.
    3. It must specifically refer to a waiver of rights under the ADEA.
    4. It must advise the employee in writing to consult an attorney before signing the agreement.
    5. It must not require the employee to waive legal claims or rights arising after they sign the agreement.
    6. The employee has 21 days to consider the agreement or 45 days if offered to a class or group of employees.
    7. The employee has seven days after signing the agreement to cancel it.
    8. Additional requirements apply when the employer discharges two or more employees over 40.
  3. The severance agreement cannot contain illegal provisions.

    For example, employee severance agreements cannot require the employee to give up the right to file a discrimination claim with the U.S. Equal Employment Opportunity Commission (EEOC) or participate in a federal government discrimination investigation. Furthermore, under Florida law, an employer cannot require employees to waive their rights to receive unemployment benefits. Likewise, any waiver that contains a material mistake, omission, or misstatement will invalidate the agreement.

  4. The employer cannot cause the employee to execute the severance agreement under fraud, duress, or coercion.

    Any of these circumstances will invalidate the severance agreement and, more specifically, any waiver or release of claims contained within the severance agreement.

  5. State laws place special restrictions on severance agreements offered by public employers.

    For example, under Florida Statutes §215.425(4)(a), any employment contracts offered by governmental units on or after July 1, 2011, that contain a provision for severance pay require that the severance pay amount does not exceed 20 weeks and that no severance pay be available when the employee has been fired for misconduct. Furthermore, with a few exceptions, §215.425(1) states that no extra compensation shall be made to public employees after the service has been rendered or the contract made, unless allowed by a new law.

Allow Us to Help You Protect Your Business Today

A business law attorney at Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. is ready to help you protect your business by ensuring that you meet the requirements of all relevant laws concerning employee severance agreements, as well as other matters. We understand how diligently you have worked to build your business, and our goal is to assist you in preserving what you have built. Contact our office today at (954) 966-2112 or reach out to us online to schedule a time to discuss your legal issues with our attorneys.

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