What Is A Release Of Claims In A Severance Agreement?
If your employer offers you severance pay, they usually want something in return: a release of legal claims. By signing, you may give up your right to sue over things that happened before you signed. This can include claims about discrimination, retaliation, wrongful termination, harassment, disability discrimination, or other workplace issues, depending on the agreement and whether the law allows those claims to be waived. While severance pay can seem appealing after losing your job, the rights you give up might be worth much more than the payment. We encourage you to fully understand what you are giving up before signing a severance agreement.
What Does A Release Of Claims Actually Do?
A release of claims is a contractual provision in which an employee agrees not to pursue certain legal claims against an employer, usually in exchange for severance compensation or another benefit.
The language in these agreements can be broad. They may try to cover claims under federal, Illinois, and local employment laws, as well as contract and common-law claims. Usually, the release covers things that happened on or before the date you sign the agreement.
Federal discrimination laws that may appear in a release include Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, the Americans with Disabilities Act, 42 U.S.C. § 12101, and the Age Discrimination in Employment Act, 29 U.S.C. § 621.
Illinois employees may also see references to the Illinois Human Rights Act, 775 ILCS 5/. Section 775 ILCS 5/2-102 prohibits numerous forms of unlawful employment discrimination and harassment.
Signing a release can therefore affect claims you already know about as well as potential claims you have not yet fully investigated.
Severance Pay Is Usually Offered In Exchange For The Release
Federal law does not require employers to give severance pay just because your job ends. The U.S. Department of Labor says the Fair Labor Standards Act does not require severance pay. Instead, severance is usually set by your employment agreement, company policy, union contract, or a special arrangement.
This is one reason why employers often require you to sign a release before giving severance pay.
Consider an employee who is entitled to receive a final paycheck and accrued benefits regardless of whether a severance agreement is signed. An employer ordinarily cannot transform compensation already legally owed into consideration for releasing additional rights. A severance package commonly provides something beyond what the employee was already entitled to receive.
We look at what the employer is really offering in exchange for your release before deciding if the agreement is a good financial deal.
A Release Can Cover Serious Discrimination And Retaliation Claims
The scope of the release deserves careful attention when an employee believes the termination may have been unlawful.
For example, if you complained about discrimination, harassment, or retaliation before being let go, a broad release might try to settle any claims related to those issues.
The Illinois Human Rights Act, including 775 ILCS 5/2-102, prohibits numerous discriminatory employment practices. Illinois law also protects employees against prohibited retaliation under circumstances covered by the Act.
Federal statutes provide separate protections. Title VII addresses employment discrimination based on race, color, religion, sex, and national origin. The ADA addresses disability discrimination, while the ADEA protects qualifying workers from age discrimination.
Before we suggest accepting a severance package, we want to know what happened before your job ended. An offer that seems generous at first might not be as good if you have strong evidence for a valuable employment claim.
Employees Age 40 And Older Receive Additional Protections
Federal law imposes specific requirements when an employer asks an employee age 40 or older to waive claims under the Age Discrimination in Employment Act.
The Older Workers Benefit Protection Act, incorporated into the ADEA at 29 U.S.C. § 626(f), establishes requirements for a knowing and voluntary waiver of ADEA rights.
Among other requirements, an individual employee generally must receive at least 21 days to consider an agreement containing an ADEA waiver and 7 days after signing to revoke it. When a waiver is requested as part of certain group termination or exit-incentive programs, employees generally must receive at least 45 days to consider the agreement, together with required information about the affected decisional unit.
The agreement must also advise the employee in writing to consult with an attorney before signing.
These requirements matter because an employer cannot enforce an ADEA waiver simply by inserting age-discrimination language into an ordinary release and obtaining a signature.
Not Every Employment Right Can Be Waived In The Same Way
A severance agreement might use broad language, but that does not always mean every waiver in it is legally valid.
Wage claims are one important example. The U.S. Department of Labor has explained that private out-of-court settlements generally do not, by themselves, result in an effective waiver of an employee’s rights under the Fair Labor Standards Act, 29 U.S.C. § 201.
The FLSA gives you rights about minimum wage and overtime, and these claims are handled differently than most discrimination claims.
An agreement also cannot necessarily prevent an employee from communicating with or participating in proceedings before government agencies where applicable law protects that activity.
This is why we do not judge severance agreements just by how many laws are listed in the release. We look at whether each part is legally valid and what will actually happen if you sign.
Illinois Law Places Limits On Certain Severance Terms
Illinois employees also receive protections under the Workplace Transparency Act, 820 ILCS 96/.
The Act governs certain employment agreements involving discrimination, harassment, retaliation, and other unlawful employment practices. Illinois law distinguishes among employment agreements, settlement agreements, and termination agreements and places restrictions on provisions that attempt to limit disclosures regarding unlawful workplace conduct.
For example, 820 ILCS 96/1-30 addresses confidentiality provisions associated with settlement or termination agreements involving alleged unlawful employment practices. Failure to comply with statutory requirements can render certain confidentiality promises void and severable from the remainder of an otherwise enforceable agreement.
You should carefully review any confidentiality or nondisclosure terms instead of assuming every restriction in your employer’s agreement is enforceable.
The Release Is Only One Part Of The Severance Agreement
Many employees focus on the severance payment and miss other parts of the agreement that could have important effects.
A proposed agreement may include confidentiality obligations, non-disparagement provisions, cooperation requirements, restrictions concerning company information, representations concerning company property, provisions dealing with references, and statements concerning pending claims.
We also pay close attention to how the agreement defines the employer and who is being released. Some agreements try to cover not just the company, but also parent companies, subsidiaries, related businesses, officers, directors, employees, benefit plans, and others.
The language matters. A few sentences buried in a lengthy agreement can determine whether an employee preserves or permanently gives up an important legal claim.
Consider The Value Of Your Claims Before Signing
The correct question is not simply, “How much severance am I receiving?”
The better question is what the employer is asking you to surrender in exchange for that money.
We examine the circumstances surrounding your termination, your compensation, length of employment, performance history, disciplinary record, protected complaints, communications with management, treatment of similarly situated employees, and the timing of the termination.
If there are signs of discrimination, retaliation, unpaid compensation, contractual violations, or another potential claim, those issues can affect how we evaluate the offer.
In some cases, there may also be room to negotiate the amount of severance, continuation of benefits, payment timing, reference language, confidentiality terms, or other provisions before you sign.
Speak With North Suburban Legal Services Before Signing A Severance Agreement
A severance agreement can affect legal rights that may be worth considerably more than the payment offered when your employment ends. Once a valid release becomes effective, claims involving discrimination, retaliation, termination, or other workplace conduct may be difficult or impossible to pursue. Understanding the release before signing can help you make a decision based on the value of both the severance package and the rights the employer wants you to surrender.
At North Suburban Legal Services, we represent employees in Chicago and throughout the city of Chicago, Illinois. We can review the proposed severance agreement, evaluate the release of claims, identify possible employment-law issues, and determine whether particular provisions warrant negotiation.
If your employer has presented you with a severance agreement or asked you to sign a release of employment claims, contact our Chicago employment law attorneys at North Suburban Legal Services by calling 312-909-6089 to receive your free consultation and discuss your legal rights before signing.
