Programs such as workers’ compensation protect employees injured on the job by providing them with monetary support during the period they are forced to be away from work. Granted on the basis of a medical record analysis and other processes that help prove the injury and the impact it has on the employee’s working capacity, workers’ compensation program is mandatory for most business organizations. From the point of view of the employer, an effective workers’ compensation program should also focus on managing risk and reducing it when necessary. One of the significant ways of managing risk is to demand an Employment Release.
Employment Release or separation agreement is made between an employer and an employee whose employment has been terminated. This agreement is also known by the names “termination agreement” and “severance agreement.” The Release can address many issues including releases of actual/potential claims to agreement not to compete. Typically, the employment release would list all the prior terms of employment and an agreement to cancel them out. Other agreements released will also be included in this document. An Employment Release must be written taking into account the interests of both employee and employer.
Here are some important facts to note:
- The employee surrenders the claims they can bring against the employer such as compensation claims, employment law claims, employment discrimination claims, and any attorney fees, costs claims, and interest among other things.
- The employer pays the employee a fee in return for waiving those claims, and this fee is different from severance pay. Severance pay is the amount provided to employees after they are removed from a position, and is generally paid when an employee is released from a job position due to circumstances such as reducing staff or job elimination rather than voluntary job termination on the part of the employee. Severance pay is paid to allow employees time to find a new position without having to suffer financially.
- Additional clauses that can be included in an employee separation agreement are:
- a description of the company-owned items the employee has to return on or before the last day of work
- the amount of severance pay the organization will pay the employee
- a non-disparagement clause that are provisions that restrict what an employee can/cannot say about the employer following a severance of employment.
- a non-compete clause that mandates that the employee agrees not to enter into or start a similar profession or trade in competition with the employer.
Let us look at some terms that must be necessarily included in an Employment Release.
- Retaliation: Anti-retaliation provisions in the workers’ compensation laws of most states create a civil cause of action against employers that harass employees who file claims. Extended legal protections are available for all employees, even those not legally authorized to work within the USA.
- Discrimination: Federal and state laws related to employment prohibit employers from discriminating against employees on the basis of race, religion, color, sex or nationality.
- Payment of wages: Wage disputes are common in connection with overtime pay and with regard to non-payment of any bonus that is due.
- Sexual harassment and emotional distress: Claims related to sexual harassment and assault at the workplace could include intentional or negligent infliction of emotional distress under tort law.
- Contract claims and breach of contract: Workers could claim that their employers violated the terms of a workplace contract. Typically, employees are considered “at will” ( a term used in U.S. labor law for contractual relationships wherein an employee can be dismissed by an employer for any reason and without warning, provided that reason is not illegal),claims could be made for implied or express contracts as well.
The employee should clearly understand what they are relinquishing under an Employment Release contract.
- The employee cannot make a claim against the employer for future unemployment compensation benefits.
- The employee cannot make any employment claims against the employer such as age, gender, or race discrimination, or claims for interference with and/or retaliation for making a workers’ compensation claim.
- The employee cannot make an application for employment with the employer at any point in the future.
Most states in America have specific laws concerning employee separation agreements. Federal laws are relevant to some aspects of termination arrangements as well. It is important to have a well-executed separation agreement or Employee Release to prevent legal issues. The focus must be on reducing risk and maximizing the effectiveness of workers’ compensation settlements. The claim management team, employer and defense counsel can discuss relevant issues and coordinate efficiently. As a medical record review company assisting workers’ compensation lawyers, we know how important it is to draft and offer Employee Release agreements with an attorney’s guidance.
Disclaimer: The content in this blog is for general information only and should not be taken as legal advice. Employment laws change from time to time and vary by industry and location. Consult a qualified lawyer or HR expert for professional guidance.