Mary manages a customer service department in a large company. Other employees and customers have complained about Brad, one of the employees Mary supervises. Most of Brad’s co-workers handle calls without requiring assistance. Yet, for a few months now, as many as 20% of Brad’s calls have had to escalate to supervisor level for resolution. When Mary has raised the issue, Brad has been rude, brushing off responsibility. While getting ready to terminate him, she also overheard Brad boasting about receiving a large payout from suing another employer. Mary is now concerned that Brad will file a lawsuit no matter how justified the company might be in letting him go. What can this employer do to reduce the likelihood of post-employment litigation?
One means of prevention is for the business to consider offering some amount of severance pay above all earned wages and accrued vacation pay, in exchange for Brad’s signed release and waiver of all claims, real or imagined, known or unknown. Thus, for additional money beyond his final, earned compensation, Brad would agree in writing never to file or pursue a claim against the company for wrongful termination, discrimination, harassment, retaliation, breach of contract, and disputed wage payments.
However, there are requirements the company must fulfill in order to ensure the applicable state and federal courts and agencies (such as the California Department of Fair Employment and Housing or the federal Equal Employment Opportunity Commission) will fully honor such a waiver. For example, if this company has 20 or more employees and Brad was 40 or over, employer must give him (1) up to 21 days to consider and sign the waiver, and if desired, to have it reviewed by an attorney; and (2) even after accepting, another seven days to change his mind and rescind the agreement.
When companies handle such severance offers correctly, the great majority of departing workers will agree to the package. Although an employer must wait the 21 days to withdraw the offer, the worker agreeable to the terms can sign the agreement on the spot or at any time before the three weeks is up.
Employers treat the seven-day rescission rule differently. Some pay the severance amount immediately on the employee’s signing the agreement. Others wait that seven days before payment.
For businesses with less than 20 on payroll and/or when the departing worker is under age 40, the waiting and rescission periods are not required. However, best practice would likely be to permit some review period, perhaps a few business days, to allow the employee to consider the terms, with or without legal counsel.
Our employment forms package includes an overview memo on administering a severance offer, a sample severance agreement, a checklist for the departing employee to initial and sign, and a sample termination letter. We also provide assistance with forms for specific terminations when requested. Ensuring proper written workplace policies, procedures and template forms are implemented can go a long way to preventing dubious suits from former employees intent on retribution. See, If It Isn’t Written, Workplace Policy is Anyone’s Guess (March, 2018)
April 20, 2018Back to Blog
If you are an employer facing possible litigation or have an employee issue on which you need immediate guidance, call us to set up a consultation, or submit your message using our contact form.