Both the language used in a severance agreement and the methods used to obtain the employees’ signatures on agreements are important. In Bacon v. Stiefel Laboratories, Inc., No. 09-21871-CV (S.D. FL October 17, 2011), the employer terminated a number of employees as part of a reduction-in-force. The employees signed a severance agreement in exchange for severance pay. However, after signing the agreements and receiving the severance pay, a number of employees sued the company and the issue was whether the release was enforceable.  

Examining the language of the agreement, the court noted the specific and broad language used in the release. The waiver covered all “federal, state, or local constitutions, laws, rules or regulations” and “any and all claims arising under…the Employee Retirement Income Security Act.” In addition, the agreement covered the company and its directors, trustees, officers, employees, representatives, agents, benefit plans and attorneys. Most importantly, the court analyzed whether the employees’ releases were knowing and voluntary. The court considered (a) the employees’ education and business experience; (b) time provided to consider the releases; (c) whether the language was clear and unambiguous: (d) if the employees were expressly advised and had sufficient opportunity to consult with an attorney and (e) the sufficiency of the consideration.  

Therefore, merely re-using a severance agreement previously used or obtained from an attorney or website may not be sufficient to protect a company. The language used in the release has to be both broad and specific enough to cover anticipated, future lawsuits. For example, the Older Workers’ Benefit Protection Act specifically requires agreements to mention the Age Discrimination in Employment Act for an employee to release claims of age discrimination. To be found enforceable, agreements may – or may not – contain specific references to statutes and regulations. In addition, both language in the agreement and the methods used by employers to obtain signed agreements are critical. Plaintiffs’ lawyers will argue that the language was unclear, that the agreement was filled with legalese that unsophisticated employees could not understand and that the company rushed the employees into signing the agreements. Therefore, before using an agreement and implementing a reduction-in-force, companies should take the step of having their attorneys prepare or review the agreements and how human resources will implement the terminations.