Releases of Liability: Do's and Don't's for Employers

by Nexsen Pruet, PLLC
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Employers often use waivers and releases of claims in agreements with former employees, either as part of a separation agreement at the time employment ends or in a settlement agreement after a former employee has raised claims against the employer. Both of these types of agreements have garnered attention lately, serving as a reminder of some best practice approaches in each context.

DO USE A CONFIDENTIALITY CLAUSE: THE $80,000 FACEBOOK POST

A recent Florida appeals court decision highlights the importance and enforceability of confidentiality provisions in settlement agreements. In Gulliver Schools, Inc. v. Snay, a school in Miami avoided payment of an $80,000 settlement to its former employee because he violated the confidentiality provision in the agreement. Patrick Snay, the school’s former headmaster, brought a lawsuit alleging age discrimination and retaliation.  The parties reached a confidential settlement agreement in which Snay was to receive $10,000 in back pay and $80,000 for a full and final release of his claims, as well as attorney’s fees of $60,000.  The agreement also contained a confidentiality clause, providing that Snay would not disclose or discuss with any person except his attorneys, other professional advisors or spouse, any information about the existence or terms of the agreement. Breach of the confidentiality provision would result in disgorgement of the release payments, but not the attorney’s fees or back pay.

Four days after the agreement was signed, the school notified Snay that he was in breach of the agreement because of his daughter’s Facebook post, which stated: “Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT.”

Gulliver Schools refused to pay the $80,000 release payment because of the breach; Snay filed a motion to enforce the settlement agreement, arguing that the Facebook post and his statement to his daughter did not constitute a breach.  The trial court granted Snay’s motion, and the school appealed. The appellate court determined that Snay’s disclosure of the settlement to his daughter constituted a breach of the agreement, and thus, he could not enforce the settlement agreement. 

Employers have many reasons for settling claims with employees, including the expense and distraction of litigation. However, settlement of a claim is often not an admission of liability by the employer.  Moreover, there may be concerns with setting a precedent for future litigation or expectation of other employees. In those instances, confidentiality provisions can be useful tools.

DON’T PROHIBIT EMPLOYEES FROM FILING AN ADMINISTRATIVE CHARGE

To obtain a valid release of age discrimination claims, certain minimum requirements must be met under the Older Workers Benefit Protection Act (OWBPA), which was enacted in 1990 to amend the Age Discrimination in Employment Act (ADEA). Importantly, OWBPA also mandates that no valid release of ADEA claims may prohibit the employee from filing a charge of discrimination or participating in an investigation with the Equal Employment Opportunity Commission.

Title VII outlaws discrimination based on race, color, religion, sex, and national origin, but has never been amended to include the same prohibition on releases that OWBPA made applicable to ADEA claims.  Nonetheless, the EEOC has taken the position that releases of Title VII claims also must not prohibit employee access to the commission through guidance and enforcement.

In February 2014, the EEOC filed suit against CVS Pharmacy alleging that the pharmacy’s five- page, small- print separation agreement is overly broad and misleading. The agreement explicitly states that it is not intended to nor shall it interfere with the employee’s right to participate in or cooperate with a proceeding with government agencies enforcing discrimination laws.  Despite this language, the EEOC is alleging that the separation agreement given to over 650 employees constitutes a pattern and practice of discrimination, denying employees full exercise of their Title VII rights because the agreement interferes with an employee’s right to file a charge with the commission.

In the lawsuit against CVS, the EEOC is seeking an injunction preventing CVS from restricting the right to file charges or participate in agency proceedings; to reform its separation agreement; to order CVS to carry out policies, practices, and programs that provide for employees to exercise their right to file a charge and cooperate with the EEOC; and to provide former employees who were subject to the agreement 300 days to file a charge of discrimination.   The suit is still pending.

Notably, many employers include similar language in their separation agreements, as this approach was approved by the EEOC in the settlement of litigation in 2006.   However, the commission’s most recent Strategic Enforcement Plan identified preserving access to the legal system as one of the agency’s top priorities, and that appears to be the impetus behind this lawsuit.

The EEOC’s success in this lawsuit against CVS is far from certain, but the suit is a good reminder for employers to ensure that separation agreements do not impede the charge process. In light of both the EEOC Strategic Enforcement Plan objectives and the litigation the commission is pursuing, employers should consider reviewing these agreements.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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