When drafting and reviewing a severance agreement, both employers and employees have to ensure that its provisions comply with employment and contract laws. During the review process, parties usually thoroughly inquire into the validity of waivers in severance agreements, especially since it involves relinquishing rights and claims.
Requirements for validity
Severance agreements can include waiver provisions, such as waivers of discrimination claims, and they are valid as long as the employee involved in the contract knowingly and voluntarily agrees to the waiver. How does one know whether a waiver is knowing and voluntary? It depends on the law applicable in the situation since the rules of waivers vary.
It is also worth noting that other rules may have other elements for a valid waiver agreement. For instance, the Civil Rights Act prohibiting employment discrimination requires a valid agreement to also offer some sort of consideration in exchange of the employee’s waiver and should not require a waiver of future rights.
Waiver of all claims does not bar filing charges
Employees who believe they are victims of employment discrimination or wrongful termination can still file a case with the Equal Employment Opportunity Commission (EEOC) even if they signed a severance agreement with a general waiver releasing their employers of all claims.
Unenforceable waivers
Provisions in severance agreement that attempt to waive an employee’s rights to testify, assist or participate in an investigation and similar processes by the EEOC are invalid and unenforceable.
The validity of waivers in employee severance contracts depends on specific legal requirements and the unique circumstances surrounding the agreement. While waivers can be an effective means for employers to mitigate the risk of future lawsuits, they must be crafted carefully to ensure that they are fair and comply with applicable federal, state and local laws.
Given the complexities of the contract, drafting and reviewing severance agreements with waivers may require legal assistance to ensure the protection of their rights and that the agreements are enforceable.