While speaking to a forum of job seekers recently, I was asked what tops my list of “don’t” when it comes to receiving proper severance. Although, at first, it seemed obvious to me, I quickly realized that it wasn’t to others. Quite simply, too many employees make the strategic blunder of immediately signing a release without having first consulted with a lawyer. In fact, whether or not a release has been signed, is one of the first questions I ask when meeting with any potential new client.
However, the employee is not always to blame. Capitalizing on the sudden financial concerns of a just-dismissed employee, a release is an effective carrot stick for an employer — dangling additional money in exchange for a signed release is an attractive bargain for many of the recently dismissed. But the effect of falling into this ill-advised trap can be daunting. Having signed a release, seldom can the bargain be reversed, whether imprudent or not.
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However, there is some hope for those who sign a release and later cry foul. Although the particular facts of each case must always be considered, various legal excuses exist, which, if proven, can invalidate an otherwise valid bargain. A court will consider the following questions.
- Is the language clear and specific? Overly complex language and vague or ambiguous terms are sufficient reasons to void a release.
- Was the release signed by a sophisticated party? Courts will consider the employee’s education and experience when determining if the employee understood what they were being asked to sign. The chances of invalidating a release decrease as the level of sophistication rises.
- Was sufficient time given to review the contents and terms of the release? I advise all of my employer clients to provide, at least, five working days for employees to consider and reflect on what they are being asked to sign. This way, it cannot later be argued that the employee lacked the capacity to understand the bargain.
- Was legal advice sought? An employee who seeks and obtains legal advice prior to signing a release will be hard pressed to argue he or she did not know or understand what was being signed.
- Did negotiations occur? Negotiating terms of severance after receiving a release raises a presumption the employee knew exactly what he or she was signing.
- Was the employer’s conduct appropriate? Courts will scrutinize whether an employer created duress, coercion, compulsion or any other undue influence by requiring the employee to sign the release immediately, or withholding minimum employment standards until the release is signed.
- Was the bargain unconscionable? Did an inequality of bargaining power exist, or was the deal substantially unfair. If either case proves to be true, courts can reverse a deal.