Employment Law Commentary -- Volume 25, Issue 6 -- June 2013: A Trap for the Unwary: EEOC Pushes Back on Overly Expansive Severance Agreements

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A familiar, if unsettling, trend the past four years has been layoffs. The calculus behind them is simple: companies need to cut costs to stay afloat amidst the weak economy, and reducing the size of their workforce is a means to that end. However, shedding jobs may be expensive in its own right, as disgruntled employees seek remedies in the courts for what they believe to be unlawful terminations. To preempt this risk, companies often resort to severance agreements to ward off potential litigation.

In contractually guarding against any claims, companies often take a bold stance. They insert sweeping language declaring that the employee will have no right to sue upon leaving the company and that the company enjoys a complete release of all potential claims. Companies may go further still and restrict the employee from even cooperating in a suit brought against it by another person or entity.

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