How to Use Releases When Terminating Employees

If you’re the one responsible for terminating employees, you probably worry about the potential for litigation. What if your employee sues you? How long does he have to sue you? Would you have any kind of insurance or other protection? 

Having the departing employee sign a voluntary release of claims ensures that you don’t have to worry about the possibility of future litigation because he voluntarily gives up any legal claims (known or unknown) that he may have against your company. Many requirements must be met to obtain a legally binding, valid release.

Releases must be voluntary and supported by consideration.

Most importantly, both in the U.S. and Canada, a release of claims must be optional; you cannot force or pressure an employee to sign one. You must also offer the employee consideration – something of value to which she is not otherwise entitled. (For example, you cannot withhold a final paycheck or refuse to turn over an employee’s personal possessions until an employee signs a release.) “Something of value” is usually a severance package, which can include both monetary and nonmonetary remuneration. This must be above and beyond any severance package to which an employee is entitled by law or contract.

Older workers have additional rights.

If you are asking a worker over the age of 40 to sign a release agreement, there are additional rules you must follow in the U.S. These include language you must include in the agreement itself as well as time periods you must allow for the employee to consider and then potentially revoke the agreement after signing.[1] Rules in Canada regarding discrimination and termination of older worker vary dramatically from province to province, offering extensive protection for workers in some locations and virtually none in others.[2]

Some claims cannot be waived.

You cannot require an employee to waive future claims against your company, i.e., claims that have not yet arisen at the time of separation. So, for example, a release of claims signed at the close of employment cannot bar a departing employee from filing suit over an auto accident with your company’s vehicle a year later.

Employees also cannot release their rights to file or testify regarding claims with the U.S. Equal Employment Opportunity Commission for violations of the ADEA (Age Discrimination in Employment Act), Title VII (Civil Rights Act, prohibiting discrimination based on protected classes), the ADA (Americans with Disabilities Act), or the EPA (Environmental Protection Act).[3] 

You should consult with legal counsel who is experienced in the rules and regulations of the jurisdiction in which your employee works to ensure that both the terms and presentation of your proposed agreement are legally sufficient.


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[1] “Understanding Waivers of Discrimination Claims in Employment Agreements.” The U.S. Equal Opportunity Commission, 15 Jul 2009. Web. 22 Oct 2015.

[2] James, Krista et al. “Age Discrimination, Inclusive Design, and Older Workers.” Employment Law Conference—2015 Paper 4.1. Continuing Legal Education Society of British Columbia, May 2015.

[3] “Understanding Waivers of Discrimination Claims in Employment Agreements.” The U.S. Equal Opportunity Commission, 15 Jul 2009. Web. 22 Oct 2015.