What if the general release in your severance agreement isn’t as “general” as you think it is? What then?


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On Tuesday, I wrote about severance agreements. Specifically, I suggested that employers benefit from: (1) drafting easy-to-understand agreements; and (2) giving former employees a reasonable amount of time to read the agreement and decide whether to sign.

Generally, if you check those boxes, you’ve got yourself an enforceable agreement in which the former employee has released all claims.

Well, there may be at least one exception.

That exception involves wage and hour claims. That is, there is a general rule that you can’t resolve a Fair Labor Standards Act claim unless the U.S. Department of Labor or a court blesses it.

Now, your mileage may definitely vary on this one.  My friends over at Jackson Lewis blogged about how different courts view pre-litigation settlements of wage and hour claims. So, depending on where your business operates, you may not need approval from a court or the DOL.

Of course, there’s also the practical consideration that if you’ve paid your separating employee all wages owed then you should have nothing to worry about anyway.

(And if you haven’t done so, then consider fixing that post haste.)

What I often do is take a belt-and-suspenders approach by not only requiring the employee to release all wage and hour claims, but initial a paragraph in the severance agreement in which the employee confirms that he or she has reported all hours worked and received all wages, commissions, overtime payments, bonuses, salary, remuneration, loot, duckets, moola, green, Mr. Green, legal tender, dough, cabbage, clams, paper, stacks, smackers, and Benjamins for all work performed.

I may shorthand that a bit. But, you get my drift.

This is another reason why Googling “severance agreement” is a bad idea. Instead, spend some money on attorney review of a severance agreement. That money you spend now could save you a lot more if an otherwise unreviewed agreement doesn’t hold up later.



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