The Dialogue – an occasional discussion between myself and a prominent employee-side attorney, Nina Pirrotti returns today after a late summer hiatus. Today’s chat focuses on employee separations and severance agreements.  Share your own tips or observations in the comments below. As always, my thanks to Nina for sharing her insights here.

Dan: Hi Nina! How was your summer? Mine was fine except I can’t stop hearing news about President Trump.

It seems to drown out everything else going on and I think I have a headache from it all. But let’s give it a try, shall we?

I know I’m often confronted with having to fashion separation and settlement agreements for employers.   

What do you find are the items in agreements that you think both sides ought to be paying attention to?

Nina: Drowning in Trump-related noise.  The image is horrifying!  My husband and I were chatting the other day about an old Saturday night live weekend update skit.  As we recall it (it was decades ago), the news media was focused on other events when all of a sudden the character playing Kim Jong Un pops into the screen, holds both arms out and complains:  “What do I have to do to get attention around here?!” 

In the age of Trump that glib remark becomes bone-chilling. 

The art of crafting a fair and balanced settlement agreement isn’t the most riveting of topics in our world but it is among the most important.  

One key strategy I use in evaluating them is to put myself in the position of the employer to ensure I understand company’s (reasonable) priorities. 

Clearly the company seeks to contain the dispute itself, keep the fact that it is settling it confidential, and do everything possible to obtain closure.    If the settlement terms go beyond meeting those priorities, a red flag goes up for me and I scrutinize those terms closely.  

In light of the company’s priorities in containing the dispute and keeping it confidential, I expect to see a confidentiality provision, limiting the disclosure of the settlement agreement to those on a need to know basis (typically immediate family members, financial/tax advisor and lawyer). 

I am also not surprised by a non-disparagement provision which prevents the employee from spreading ill will about the former employer. 

Since I generally advise my client that it rarely reflects well on an employee to speak negatively about his/her former employer (no matter how justified the employee might be in doing so) I usually do not oppose such provisions. 

I will often, of course, make them mutual so that key employees at the company also commit to not disparaging my client. 

In light of the company’s priority in seeking closure, I do not have a one-size fits all response to no re-hire provision.  I understand the company’s concern that should the employee who has settled claims for discrimination apply for a position down the road and the company (for legitimate reasons) declines to hire that employee, it nonetheless remains exposed to a potential retaliation lawsuit by the employee. 

No re-rehire provisions in certain situations can be appropriate but only if they are narrowly tailored to the company itself.  Alarm bells go off for me, therefore, if the employer is large and has numerous affiliates and subsidiaries and the employer insists on including them within the scope of the no-rehire provision. 

In such cases, no-rehire provisions can be tantamount to mini-restrictive covenants and, where they hamper my client’s ability to find comparable work, I will reject them as untenable. 

Speaking of restrictive covenant  provisions, it irks me to no end when an employer tries to slip one into a settlement agreement where the employer was not bound by one during the course of his/her employment!   Such provisions are generally a non-starter for me, absent considerable additional compensation for them. 

Finally, as we discussed in an interview you conducted with me many years ago, I do not abide by liquidated damages provisions. 

If a court determines that my client has breached the agreement, even if that breach is deemed a material one, the employer should still bear the burden of proving that it has been damaged and, to a reasonable degree of certainty, the monetary amount of that damage. 

What are your thoughts, Dan?   Have I articulated the company’s main priorities well?  Are there others I am missing that I should consider the next go-round?   Do tell and I promise to listen with an open mind!

Dan: Well, one day we could talk about Trump-related employment litigation, if you’d like to really talk more about Trump.

You’ve hit on some of the highlights from an employer perspective. When crafting one for an employer, I will let you in on a “secret” – we have a template.

I know — probably not a big surprise to you since our firms have negotiated enough of them.

As a result, I find that agreements at this point are sometimes more of finessing around the edges, rather than major re-writes.

The problem I see is that there are some employers who are using a form separation agreement handed down to them years ago, without understanding what’s in them.

First off, the agreements — regardless of whether you’re trying to comply with federal law or not — should really be written in “plain English”.

Get rid of the “Whereas” clauses.

Use bold language or simply to understand provisions.

And try not to have it be 15 pages.

Second, the agreements should contain: a) a release of all state and federal claims (and local ones if you’re in places like New York City); b) confidentiality (and if it needs to be mutual, so be it); c) non-disparagement (same).  There’s more of course, but start with the basics.

Third, employers should think about provisions that may actually be helpful: a) What are you going to do about references? Is it “name, rank, serial number” or something more? b) Do you want an arbitration provision for any breach of the separation agreement?

Neither is typically a high priority but taking care of some of these details are important.

A few employers are trying to get the “best” deal and negotiate strongly but I find most employers just want to move on; the termination was probably not something that they wanted to do anyways and putting some distance between the employee and the company is probably a good thing for the business ultimately.

Since you’re not finding separation agreements all that exciting, what about how employers handle the termination or termination meeting itself? I’m sure you’ve heard some stories from clients.

Nina: Wow – you hit the jackpot with that question!   

I was once asked at an ABA conference at which I spoke what was one step management lawyers could take to maximize the chances that a departing employee won’t seek out the counsel of someone like yours truly. 

My answer?  Treat them like human beings when you terminate them.   

Don’t do what one Fortune 500 company did to one of my clients which was to call her as she lay in a hospital bed with her infant daughter who had been born earlier that day and inform her that she need not return to work because her job had been eliminated.

Time and again prospective clients had told me that they would have gone quietly into the good night had their employers treated them with a modicum of respect during the termination process. 

I recently settled a case involving a woman in her mid-60s who had worked for the same company for 20 years and proven time and again that she would do ANYTHING for that company and, indeed, had worn a number of hats over the years, shedding one and donning another as the company’s needs shifted.  In her 20th year, a new CEO was hired and you can guess what happened next.  He terminated her and replaced her with a brand new hire, decades younger, who my client had helped train.   

Doesn’t sound kosher right, but that is not the worst part! 

It was the WAY the company terminated her that prompted this lovely, meek, non-confrontational woman to summon up the courage to pick up the phone and call me. 

Her termination consisted of a three minute meeting in which the CEO informed her she was no longer needed and handed her a severance agreement that provided her with two measly weeks’ pay. 

She was literally sobbing as she signed it then and there after which she was immediately escorted out the door.   She contacted me weeks after she signed her agreement.  Too bad, so sad, right?  Wrong. 

The employer neglected to include in her severance agreement language required by the Older Worker Benefits Protection Act (OWBPA), including a 21-day period to consider the agreement and a seven-day revocation period.  She was able to keep her paltry two weeks and I got her many months more on top of that!   

There are so many morals to that story, the least of which is that severance agreements for employees over 40 should comply with the OWBPA.   Employers should be expressing their gratitude to terminated employees who have proven their devotion to the company by providing them with severance that sends the message that they valued that devotion.  

There other ways to go that extra mile to treat such employees with dignity.   Think about how you would want to be treated if you were undergoing one of the worst days of your life and act accordingly.  Thank them for their service, tell them how sorry you are, assure them that you will do everything in your power to facilitate their transition, allow them to say goodbye to their colleagues, hell, even offer to throw them a farewell gathering.  The possibilities are endless.  Sometimes we lawyers get in our own way. 

Dan, I know none of the clients who have had the benefit of your wisdom prior to terminating an employee would succumb to such pitfalls.  But what do you do when you have to clean up after the fact?

Dan: You’ve raised a good question, but I want to address something you said first. 

You said: “Employers should be expressing their gratitude to terminated employees who have proven their devotion to the company by providing them with severance that sends the message that they valued that devotion.”  

It’s that phrase that I think gets to the heart of the issues with severance in 2017. 

When I first started practicing (a few years ago, ahem), there were still many companies that offered severance without ANY release because that just seemed “the right thing to do.”

After all, there was still a bit of an unspoken contract that employers would take care of employees.

Think back to the “Mother Aetna” description of the insurance company.  But as the recessions took their toll and employee mobility took root, that social contract has definitely been frayed over the years.  In part too is the rise of employment litigation. 

Now each employer has to worry: Is THIS going to be the employment termination that leads to a lawsuit?

 I can’t even remember the last time that an employer offered severance without also demanding the employee sign a release. 

In other words, the idea of severance as “gratitude” and “thanks”, has now been replaced with much more of a quid pro quo. 

For employers, the thought ii: If we give you this severance, please don’t sue us. 

And yet for employees, some of them still remember the days when severance was just something companies did without worrying about the lawsuit. And so when the employer demands the release, some employees take offense to it, not realizing that times have changed. 

As a result, I have also seen employers trying to offer less and less; the notion of one week of severance per year of service (with caps) is still strong, but not universal. 

As to being the fixer – yes, sometimes it happens.  The lack of OWBPA provisions is really something that just shouldn’t happen anymore. 

But it’s more that employers go ahead with the termination without thinking about what comes next.  And some employers are moving so fast, that the details such as having two people in the termination meting and having COBRA information available, get lost in the shuffle.

I don’t know of a single employer that has enjoyed firing an employee.  

Even when they catch an employee red-handed, many employers are aware of the consequences that may flow for the employee from a firing. The employee may have a tough time finding a new job, for example. 

But it strikes me that a small subset of terminated employees are LOOKING to bring suit or a payday instead of looking forward to a new time in their life. 

Obviously sometimes past discrimination has to be examined, but what do you think makes employees sue their employers instead of signing severance agreements that are presented to them?

Nina: I think that employer conduct that rises to the level of actionable discrimination and/or retaliation is alive and well, unfortunately. 

The only up side of all of this is that I get to keep my day job, which I love! 

Of course there are those (“small subset” would accurately describe them) who seek to avoid accountability and are looking for a quick pay out of claims. 

Virtually all of those individuals never make it to our front door. 

I say “virtually” because we are human, after all, and one or two may sneak through the cracks in that door. 

But then we have competent lawyers like you for whom we have great respect who (very politely) convince us – – with facts – – that we are being misled. 

That is why I believe that the only situations in which early negotiations are successful are those in which both sides fight their natural inclinations to hold their cards close to their chests and actually share meaningful information from the get go.  

But how to conduct negotiations effectively is a topic worthy of its own separate dialogue, no?

Dan: I think so. Now, I have to save whatever energy I have left to stay up late to watch playoff baseball with the Yankees. Hopefully, it’s a long October filled with lots of late nights and distractions.  Until next time, Nina!  

Before I even begin this post, let me advance the disclaimer right off the bat: Despite the title of this post, there is no sure-fire way to fire an employee without getting sued.

Indeed, the title is a bit of a misnomer.  It’s often been paraphrased that anyone can sue anyone else for anything at any time in any court. While that’s not quite true, it’s not that far off the mark either.

There ARE, however, ways to fire an employee that can reduce or, in some ways, eliminate the likelihood of being sued.

In fact, I had been working on a draft of this post for sometime thinking of how I could help others make the process of firing a bit more humane.  I’ve had many discussions with clients over the years about how firing an employee is one of the toughest things that they’ve had to do as a “boss”. fire

Yes, firing is part of the job, but I’ve yet to meet an employer that has enjoyed it. Inevitably, there is a sigh of relief when the termination meeting is over.

(And to be sure, the impact on the employee is almost always worse.  There are few things worse in life than being fired, even if it ends up leading to good things later.)

Of course, before I could finish my draft post, Jon Hyman alerted me to an excellent post by the Harvard Business Review entitled “A Step-by-Step Guide to Firing Someone.”

It’s really well done and I encourage you to read that first before finishing this post up.

Among the overall tips:

  • Start by creating a transition plan
  • Take the termination meeting itself step-by-step
  • Avoid misdirected compassion

The discussion in the article about the termination meeting itself is particularly insightful.

Here are three more things to think about too:

  1. Ask yourself: “Is the Termination Decision Fair?”  Sometimes, I rephrase this question into the following: “If you were telling your neighbor about the firing, what would he or she think about it?”  But it all comes done to the same point: Would a third person (or a jury) think the process you used to fire an employee was a fair and just decision?

    For performance-related terminations, you may look to whether the employee had been put on notice that his or her performance was faulty and given an opportunity to improve.

    For reorganizations or reductions-in-force, ask whether the process you are using to select employees (whether it’s seniority, overall performance, or other legitimate factors) is explainable and non-discriminatory.

  2. Consider A Separation Agreement: When I first started practicing law, separation agreements were the exception. Now they are the rule.

    If you’re firing someone and you want to avoid being sued, consider a separation agreement where you offer some severance in exchange for a release.  Of course, I’ve been talking about this since way back in 2008 – so this isn’t something new. But do yourself a favor: Use an agreement that complies with the law.

  3. Know the Difference Between “It’s Legal” and “It’s a Good Idea”: Over the years, I’ve had more clients ask me whether a proposed firing was “legal”.  But as I’ve said in the past, just because something is “legal” doesn’t mean it is a good idea.  For example, it may be “legal” to fire an employee by e-mail, but it may result in hurt feelings and the idea by the employee that the employer doesn’t value the employee as a human being.

    So, when you’re seeking legal advice on a termination, be sure you’re asking the right questions and getting the best advice from your counselor about the termination itself.

There are, of course, many more aspects to a firing than just this. But if you follow a few of these items, it can help reduce the risk of a lawsuit.

Just a quick followup today on a post from last month.

As I reported then, a District Court judge dismissed a closely-watched EEOC lawsuit against CVS challenging a pretty standard severance agreement.  But the grounds for the dismissal were unknown back then.

The wait is over; the written decision was released yesterday.  For those that were hoping that the court might shut this issue down, you will be disappointed because the court decided the case largely on procedural grounds.  The Court found that the EEOC had not exhausted its conciliatory efforts required by law.

Yawn.

And so, we’re back to where we were at the start of the year.  The EEOC is likely to continue to push this issue.

Still, I remain unconvinced by the merits of the EEOC’s arguments.  Courts have, for example, routinely upheld enforcement of severance agreements — albeit in different contexts.  But the arguments raised by the EEOC appear to be a stretch to me.

So, for now, employers should continue to stay alert on this issue but until we hear otherwise, it also seems that many will find it best to continue to use these agreements without further modification.

Last week, a story caught my eye and the attention of some of my colleagues.  As reported first by Bloomberg BNA, IBM has stopped providing the comparison information that is typically required in separation agreements for older workers under the Older Workers Benefit Protection Act.

You may be wondering how that is possible.  Robin Shea, of Employment & Labor Insider beat me to the punch with a very good recap that I don’t think I can improve upon.  So I’ll cite two paragraphs below:

As you know, when an employer has a “group termination” — usually, a reduction in force, but a “group” can be as few as two people – it is required to disclose the job titles and ages of the individuals in the “decisional unit,” which means the working unit from which the decisions were made. If the employer doesn’t make the disclosures (and get ‘em right), then it can’t get a valid waiver of age discrimination claims under the federal Age Discrimination in Employment Act although the waiver may be valid in other respects …..

But how can IBM do this?  They aren’t requiring employees to give up their age discrimination claims, that’s how. They’re just requiring them to use arbitration instead of the court system. Which I think is legal, based on Gilmer v. Interstate/Johnson Lane, a Supreme Court decision from the 1990′s.

In essence, IBM is using a separation agreement with two sets of rules: For all claims except age discrimination, employees must release IBM. For age discrimination claims, IBM has said that employees do not have to release IBM but must take any such claims to arbitration.

Will it work? That remains to be seen. It has yet to be challenged in court or the EEOC.

But most employers are not IBM and do not have the resources to take this strategy.

So I suspect that many employers will simply follow the path of least resistance and provide the comparison information under the OWBPA.  If done right, then employers will get the benefit of an additional release without the hassle of arbitration or the added cost.   It’s worked for many employers for over 20 years and, IBM’s strategy notwithstanding, it’s probably not worth changing gears now.

There are many good free resources for additional background on this topic. One that I would suggest was produced by the ABA in 2008 and is still highly relevant today.

As this blog has grown over the last few years, I’ve noticed that some readers have missed earlier articles on relevant topics.  Indeed, sometimes they ask why I haven’t written about it before when, in fact, I have. 

Rather than write the same post again, I thought it would be useful, from time to time, to look back at some of those posts for guidance.

Back in May 2008, I discussed how employers should develop a checklist for their separation agreements.  Importantly, there is a law called the Older Workers Benefit Protection Act that is still unfamiliar to many employers.  Check it out and make sure your agreements meet the requirements. 

Yesterday, I commented on the ongoing drama between the state and the former DOT commissioner, who’s departure late last month sparked questions from reporters about the circumstances of his resignation.

This morning, I spoke to Richard Hayber, the attorney for the outgoing DOT commissioner about the matter.  He provided me with a copy of a press release which is attached.  (Readers of this blog may recall that Attorney Hayber also publishes the Connecticut Employee Rights Blog.)

In speaking with Attorney Hayber, he decried the state’s release of the stipulated agreement between his client and the state saying that his client was told that the agreement would never see the light of day.  He also pointed out that he was having a difficult time seeing how the agreement could be released under the state’s FOI laws.

Under Conn. Gen. Stat. 1-214a, separation agreements that contain a confidentiality clause can be released if if there is "alleged or substantiated sexual abuse, sexual harassment, sexual exploitation or sexual assault by such employee or contractor." But as Attorney Hayber points out, there is no such confidentiality provision nor is there any reference in the agreement to alleged sexual harassment.  As such, he argued, his client may have a claim that the agreement was improperly released, particularly because personnel files are generally exempt from disclosures.

But Attorney Hayber also lamented the process in which the agreement was signed. He indicated that his client strongly denies any wrongdoing and noted that his client has never been told the identity of the person raising the so-called issues or the conduct claimed. "He’s never been told the answers when, where, who, what questions." 

He also said that his client was asked to come to the resignation/dismissal meeting alone without being provided a reason for such meeting ahead of time (which I note, isn’t that uncommon) and was told that he had to sign a stipulated agreement on the spot indicating he resigned, or he would be involuntarily dismissed. 

Attorney Hayber also said that even the agreement itself may be unconstitutional and a violation of his client’s First Amendment rights because it imposes limits on what his client has say about the governor, or any state employee even if such criticisms are based in truth.

At the end, he stated that his client is exploring his "legal options."  Something tells me we have not heard the last of this matter. 

There will be more about this case on the Face the State program on Channel 3 this Sunday at 11 a.m.

Earlier this month, I posted on a bill pending before the Connecticut General Assembly that would have changed the statute of limitations for filing employment discrimination claims and allowed a Complainant to ask for a release of jurisdiction of the CHRO as soon as possible.

This week, the Labor & Public Employee Committee approved of the bill — with some significant differences than the original bill. 

H.B. 5206 now gives an person who complains to the CHRO the right to opt out of the process any time. The CHRO mutst provide the release within 10 days unless the case has been certified for a public hearing.  The CHRO can defer on the request for 30 days "if the executive director…certifies that he has reason to believe that the complaint may be resolved within that period."

You can view the substitute bill here and the joint favorable report here. 

The bill now moves on to the Judiciary Committee.

(My thanks to my partner Joshua Hawks-Ladds, for his background on this post.) 

In a hearing earlier today, the Equal Employment Opportunity Commission discussed the "devastating impact" that age discrimination has on workplaces and employees.

For employers, however, the most notable item from the hearing was the release of new technical guidance regarding separation agreements and the waivers of age discrimination claims contained in such agreements.  You can access the EEOC’s new guidance here.

My initial glance at the guidance doesn’t reveal anything particularly revolutionary. After all, age discrimination waivers have long been covered by the Older Workers Benefit Protection Act. I’ve previously discussed these rules at length here.

The appendices are particularly helpful for those unfamiliar with the issues. In Appendix A, for employees, the guidance provides a checklist of issues an employee should review when his or her employer offers a severance agreement.

For employers, Appendix B will be helpful because it provides a sample release that an employer can use as the basis for a future separation agreement.

Either way, expect to hear more about this in the upcoming days.  I’ll post a further update, if necessary, upon my review of the new guidance in more detail.

With all the talk about layoffs, separation agreements have moved front-and-center to the discussion on how companies can reduce their liability exposure.

But how much severance should a company offer to its employees when laying them off?

There is, of course, no set rule in Connecticut — or the United States — on how much severance is warranted under the circumstances. But one study released last week suggests some benchmarks.  (H/T to Pennsylvania Labor & Employment Blog and Compensation Force).

The survey, by Right Management, found that U.S. employees typically earn the following amounts of severance (which represents mean weeks of severpublic domain - from wikipedia common imagesance for each year of service)

Voluntarily Separated:

  • Top Executives – 2.76
  • Senior Executives – 2.23
  • Department Heads/Managers – 1.55
  • Professional/Technical – 1.39
  • All other employees – 1.23

Involuntarily Separated:

  • Top Executives – 3.04
  • Senior Executives – 2.49
  • Department Heads/Managers – 1.78
  • Professional/Technical – 1.60
  • All other employees – 1.44

In advising employers, several seem to have adopted the one week or two weeks per year of service formula.  But in doing so, the employers provide the severance only in exchange for a full release of claims by the departing employee. 

Just be sure that when setting up the release, that you comply with the various rules associated with such agreements, including the OWBPA.