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SEVERANCE NEGOTIATIONS
Every litigation involves three elements:
(1) Liability;
(2) Damages; and
(3) Collection.
Unless an employee's case has all three elements, it will not succeed.
Every employer faces three potential consequences from litigation:
(1) Legal consequences;
(2) Economic (financial) consequences; and
(3) Political (public relations) consequences.
Any one of these three potential consequences might be enough to motivate an employer to bona fide negotiate with an employee; the more potential exposure to the employer, the greater the willingness to negotiate.
To avoid litigation, most reasonable employers are willing to agree in writing to: (1) convert a termination to a resignation; (2) provide a neutral employment reference (i.e. verification of employment dates, position, and description of duties only, without more); (3) execute mutual general releases; and (4) keep the terms of any employment termination and/or settlement confidential. The employer will also want a clause stating that settlement/payment does not constitute an admission of liability. The remaining negotiaions involve agreement over the amount of severance pay, benefits, vested/non-vested rights, and/or damages (both economic and non-economic) suffered by the employee.
A discrimination or harassment claim filed with the Equal Employment Opportunity Commission (EEOC) or the California Department of Fair Employment and Housing (DFEH) is confidential and not a matter of public record. A lawsuit, on the other hand, is a matter of public record, and a copy of a complaint filed in Court (containing the charging allegations) can be easily obtained. A company's past history of documented violations may become admissable in Court as evidence of pattern and practice. So, it is essential for an employer to keep a spotless record.
In some cases, an insurance carrier may become involved in negotiations on behalf of the employer. Typically this occurs if the claim has been tendered by the employer to its carrier, and the carrier accepts with or without a reservation of rights. The carrier, however, never insures the employer for intentional torts -- and the potential exposure to the employer to an award of punitive damages can be significant, depending on the facts of the case.
It is a California Labor Code violation for an employer to ask an employee to sign a release or waiver in exchange for payment of monies already due and payable to the employee (i.e. accrued but unpaid wages, overtime, vacation/leave time). An employer who does this is subject not only to civil suit, but has committed a misdemeanor. On the other hand, an employer can offer an employee some additional amount not already owing to the employee in exchange for execution of a waiver or release, and if the employee accepts, the waiver or release is binding.
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An employee may not threaten the employer with a criminal or administrative action in order to evoke a civil settlement or payment. The best course of action for an employee with a claim is to consult with an attorney regarding his/her rights to proceed with litigation, and/or the proper way to negotiate with the employer upon termination.
With respect to releases, the parties typically execute mutual general releases, waiving any and all rights under Section 1542 of the California Civil Code, which provides as follows:
"A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him [her] must have materially affected his [her] settlement with the debtor."
This means that each party acknowledges that he/she/it is aware that he/she/it may hereafter discover claims presently unknown or unsuspected, or facts in addition to or different from those believed to be true. Nevertheless, it is the intention of each party to fully, finally and forever release and settle all such matters, and all such claims relative thereto. The release is intended as a full and complete general release, notwithstanding the discovery of any such additional or different claims or facts relative thereto.
And, if a potential age discrimination claim by the employee is involved, the release or waiver will also contain certain other provisions, pursuant to the Federal Age Discrimination in Employment Act ("ADEA") and the Older Workers Benefit Protection Act ("OWBPA"), as follows:
(1) The release/waiver must be knowing and voluntary;
(2) It must be part of a written, clearly understood agreement;
(3) It must refer specifically to ADEA rights or claims;
(4) It must exclude waiver of claims and rights arising after date of waiver;
(5) Additional monies/consideration must be paid by the employer (something the employee is not already entitled to);
(6) It must advise the employee to consult an attorney;
(7) It must provide 21 days for an employee to consider the waiver before signing (45 days if group offer); and
(8) It must allow an employee 7 days AFTER signing to revoke the waiver.
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Disclaimer: The information on this website is provided to assist the general public.
It does not consitute legal advice or create an attorney-client relationship.
Copyright (c) 1997 Joe DiPaola
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The Law Offices of Joe DiPaola, Esq.
