The federal Equal Employment Opportunity Commission has issued guidance relating to the use of severance agreements or agreements from former employees that they release all known and unknown claims agains the employer in exchange for some form of consideration - usually money.
According to the EEOC: Employee reductions and terminations have been an unfortunate result of the current economic downturn. Even in good economic times, however, businesses of every size carefully assess their operational structures and may sometimes decide to reduce their workforce. Often, employers terminate older employees who are eligible for retirement, or nearly so, because they generally have been with the company the longest and are paid the highest salaries. Other employers evaluate individual employees on criteria such as performance or experience, or decide to lay off all employees in a particular position, division, or department. An employer’s decision to terminate or lay off certain employees, while retaining others, may lead discharged workers to believe that they were discriminated against based on their age, race, sex, national origin, religion, or disability.
To minimize the risk of potential litigation, many employers offer departing employees money or benefits in exchange for a release (or “waiver”) of liability for all claims connected with the employment relationship, including discrimination claims under the civil rights laws enforced by the Equal Employment Opportunity Commission (EEOC) -- the Age Discrimination in Employment Act (ADEA), Title VII, the Americans with Disabilities Act (ADA), and the Equal Pay Act (EPA). While it is common for senior-level executives to negotiate severance provisions when initially hired, other employees typically are offered severance agreements and asked to sign a waiver at the time of termination. When presented with a severance agreement, many employees wonder: Is this legal? Should I sign it?
Read the guidance on the EEOC Web site. Remember - always consult with legal counsel before having a departing employee sign such a document. These documents should never be "boiler plate." Make sure you do not rely on a document downloaded from the Internet - it may be from another state or contain illegal provisions.