The One Thing You Can Never Release In a Settlement Agreement

Legal disputes end in one of two ways—either with a judgment by a court or an agreement between the parties. The vast majority of cases follow the latter course.

When parties enter an agreement to settle a dispute—either in a settlement agreement ending litigation or a severance agreement ending one’s employment—the goal is to release all claims brought, or that could have been brought. An employer is paying the employee, in part, for the certainty that the employee will not file other claims against it in the future for past acts. Thus, these agreements typically contain general releases, along with covenants not to sue.

Do not, however, make the mistake of including in your agreement a covenant forbidding the employee from filing a discrimination charge with the Equal Employment Opportunity Commission or other agency. The EEOC will view such a provision as retaliatory under Title VII.

Last week, the Agency announced that it had reached a settlement with Baker & Taylor over claims that the company “violated Title VII by conditioning employees’ receipt of severance pay on an overly broad, misleading and unenforceable severance agreement that interfered with employees’ rights to file charges and communicate with the EEOC.” The EEOC alleged that the company required employees “to sign a release agreement that could have been understood to bar the filing of charges with the EEOC and to limit communication with the agency” in order to receive their severance pay.

The offending provisions (taken from the EEOC’s Complaint) were as follows:

• “I further agree never to institute any complaint, proceeding, grievance, or action of any kind at law, in equity, or otherwise in any court of the United States or in any state, or in any administrative agency of the United States or any state, country, or municipality, or before any other tribunal, public or private, against the Company arising from or relating to my employment with or my termination of employment from the Company, the Severance Pay Plan, and/or any other occurrences up to and including the date of this Waiver and Release, other than for nonpayment of the above-described Severance Pay Plan.”

• “I agree that I will not make any disparaging remarks or take any other action that could reasonably be anticipated to damage the reputation and goodwill of Company or negatively reflect on Company. I will not discuss or comment upon the termination of my employment in any way that would reflect negatively on the Company. However, nothing in this Release will prevent me from truthfully responding to a subpoena or otherwise complying with a government investigation.”

Written by Jon Hyman, a partner in the Labor & Employment group of Kohrman Jackson & Krantz. For more information, contact Jon at (216) 736-7226 or jth@kjk.com.