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The EEOC’s Viewpoint on Separation Agreements

eye glassesMost employers like using separation agreements when an employee is terminated. This type of contract provides them finality with terminated employees. A typical separation agreement provides a severance payment in exchange for the employee’s waiver of the right to sue the employer. Having this type of protection has worked well for employers, but it is important for employers to closely review their separation agreements to ensure they comply with the Equal Employment Opportunity Commission’s (EEOC) interpretation of the law regarding their enforceability.

The EEOC has recently filed lawsuits against several companies asserting their separation agreements are overly broad. The EEOC has advised that separation agreements should make it clear that employees do not waive their right to file charges with the EEOC or participate in the EEOC’s investigations by signing the separation agreement, even though it is permissible for the employee to waive claims for damages under the laws the EEOC enforces.

While employers are waiting for pending cases to be decided before they have clear guidance on what the EEOC expects, below are a few general guidelines for evaluating your separation agreements:

  • If your contract contains “carve-out” language, it should be emphasized by being typed in all caps, bold, underlined, italicized, or a combination of these.
  • The agreement should explicitly state that the employee retains the right to file charges with the EEOC or participate in any agency investigations under the laws the EEOC is charged with enforcing.
  • The contract can still provide for payment to the employee in exchange for the employee’s agreement to waive the right to file a lawsuit in court or to recover money for a claim filed with the EEOC.
  • Include a provision stating that if the court finds that any clause in the separation agreement is unenforceable, the remainder of the contract remains enforceable.
  • Keep the contract as short and concise as possible and avoid using too much legalese.

The Swenson Law Firm is located in Orangevale and we proudly serve businesses of all sizes and employers from all over the State of California. Contact us today to learn more about how we can assist you with matters such as business formation, contract negotiations, hiring employees, protecting your intellectual property and defending lawsuits. With our years of complex business trial and litigation experience, we are an effective, efficient and affordable choice in representing you at the bargaining table and in the courtroom.

 

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