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Signed Release Limits Litigation

On Behalf of | Mar 25, 2010 | Employment Law

When an employer fires an employee and provides her severance pay she would not otherwise be entitled to, that employer should seriously consider requiring the employee to sign a release in exchange for the severance pay. A clear, properly drafted and signed release may prevent the employer from incurring substantial costs in time and money to defend a potential legal claim by the former employee. The New Hampshire federal court ruled to enforce such a release and barred the former employee from bringing a claim against the employer in April, 2008, in the case of Carol A. Budro v. BAE Systems Information and Electronics Integration, Inc.

Carol Budro represented herself and alleged that BAE violated the Age Discrimination and Employment Act (ADEA) by denying her employment opportunities within the company because of her age and by terminating her after she complained. Budro was employed from 1972 until she was laid off in August 2006 as part of a reorganization. Budro had worked with a team setting up a test lab for BAE and her primary role involved acquiring materials and equipment. According to Budro, once the lab was complete her managers told her that there were no employment opportunities in BAE that required her skill set.

When Budro was laid off, she was given the option to preserve any claims she had against BAE and receive a basic severance benefit, which for her amounted to $1,937.60, or take the supplemental pay on the condition that she sign a release. The supplemental severance pay for her totaled $27,126.40. Budro took the supplemental severance pay and signed the release.
The Court found the release complied with all the special provisions necessary to make it valid under the ADEA including giving her the right of up to 45 days to review the release with additional information to determine how older workers were affected in the layoff. If an employment termination not related to a mass layoff but solely related to one employee, the time period given to the employee to review a release is 21 days. Thereafter, if the employee has signed the release, she has 7 days to revoke her acceptance of the severance pay in exchange for the release, but thereafter cannot revoke the release as it is binding.

In Budro’s case against BAE, the New Hampshire federal court found that the release was binding and dismissed Budro’s claims against BAE without her having an opportunity to be heard before a jury. Irrespective of whether Budro’s underlying claim of age discrimination had merit or not, BAE saved substantial costs of litigation, both in time and money, by having a properly drafted and executed release which allowed them to have the case dismissed.

If an employer believes an employee may have sufficient claims and may be unwilling to sign a release in exchange of the severance pay offer, the employer should contact its employment counsel rather than forgoing offering the severance pay in exchange for a release. It will be important to discuss the specific circumstances of the case and determine the best strategy when dealing with that employee. Among the options might be the decision not to terminate the employee at that time and use the time to further document performance problems before terminating the employee or to increase the proposed severance payment to be paid in exchange for the release.

J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at [email protected].