It’s time! An employee needs to go. The departure needs to be a clean break with no threat of future litigation. A severance pay agreement, in exchange for a promise to never bring a claim against the company or speak ill of the company, looks like a good idea.
The employee accepts the extra money and signs the agreement waiving all potential claims and to keep corporate information confidential. You are a hero! The company will never hear from the employee again. Right? Not so fast-at least according to a number federal law enforcement agencies.
The Equal Employment Opportunity Commission’s (“EEOC”) position is that an employee can sign a separation agreement with a waiver or general release of claims. However, the employee still retains the right to file a charge of discrimination with the EEOC. The practical effect: you pay the employee severance but might still have to respond to an EEOC charge.
In August 2016, the Securities and Exchange Commission (“SEC”) issued cease-and-desists orders (which included hefty monetary penalties) against two companies whose separation agreements required departing employees to keep company information confidential. The employees had also waived their right to recover money even if they complained to a government agency. The SEC held that these provisions violated an agency rule implementing the whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Not to be outdone, the Occupational Safety and Health Administration (“OSHA”) recently issued new policy guidelines for its review of settlement agreements of OSHA whistleblower claims. OSHA will not approve certain clauses requiring an employee to waive his/her right to a monetary award for providing information to OSHA.
Oh-and don’t forget about the National Labor Relations Board (“NLRB”). It has aggressively pursued confidentiality policies and agreements that it determined to be overbroad. The NLRB position is that certain language in these agreements has a chilling effect on non-supervisory employees’ exercise of their Section 7 rights under the National Labor Relations Act (e.g., the right to discuss wages, hours and working conditions with their co-workers).
And more changes are likely to come. EEOC Miami District Director Michael Farrell has recently advised that the EEOC intends to issue new guidance on separation agreements, possibly by the end of this year. It is possible that this new guidance may seek to implement the positions that the EEOC has taken in recent court actions challenging common provisions in employment separation agreements, such as a non-disparagement provision, confidentiality, and waiver of the employee’s individual right to recover damages from any action brought by the EEOC on his/her behalf (if the employee files a charge after signing the separation agreement). To date, the EEOC has not prevailed in these court actions.
What does this mean for you? Forget about using your standard “old” template separation and confidentiality agreements. Why? Because if you do not update your separation agreements (with legal counsel advice), the agreements may be held to be invalid or unenforceable when reviewed by one of the above government agencies.
NOTE: When the EEOC issues its national guidance on separation agreements, look for our seminar reviewing these various new standards.