When an executive and an employer sign a Separation Agreement and Release, it should end the relationship between the parties, resolve all issues between the parties, and eliminate the possibility of any future disputes (except for situations where one party flatly violates the agreement). However, litigation between employers and former employees arises after the execution of a Separation Agreement and Release much more often than it should.
In Buster v. Mechanics Bank (N.D. Cal., 11/17/16), a federal district court in California ruled in favor of the former executive seeking to recover vested SERP benefits that the company claimed he had released. The Release read, in relevant part, as follows:
[T]his Agreement extends to and fully releases the Bank and any and all Releasees from all claims of every nature and kind, known or unknown, suspected or unsuspected, vested or contingent, past or present, arising from or attributable to the Bank or any Releasee including but not limited to claims arising under…the Employee Retirement Income Security Act…any other civil rights law, attorney fee law, or Executive benefits law, and any other law or tort. The only exceptions to this release are claims for workers’ compensation, claims for unemployment compensation, and claims for indemnification.
The court, rightly in my view, essentially held that a company cannot trick a former employee into signing away rights to compensation and benefits to which he is indisputably entitled. But the question that occurred to me was: How did a release this broad get past the executive's counsel? This is a lawsuit that never should have been necessary. A release should set forth the claims and potential claims being released, but it also should list the claims not released, such as right to vested benefits. If there is any question at all as to what the vested benefit are (or other questions, such as the amount of unpaid bonus, etc.) the Release or the Separation Agreement should address them unambiguously.
Just a reminder that executive compensation counsel must concern itself with more than just the dollars involved in the agreement.