I HAVE TO GET RID OF THIS GUY: SEPARATION AND RELEASE AGREEMENTS

Steven Cesare, Ph.D.

A highly-successful business owner from Florida called me the other day to talk about a problematic employee whose tenure with his company was coming to an end. Until recently, the employee had been an effective Customer Service Manager, promoting the company brand, cultivating successful client relationships, and adding value to the organization’s financial standing. Unfortunately, those were the good old days, in that the employee has now inexplicably begun to demonstrate a litany of ineffective behaviors (e.g., poor job quality, delinquent and inadequate client responsiveness, job costing errors, loss of revenue, incorrect pricing on estimates, poor work ticket management, and lack of accountability to his supervisor).

I know this employee would never work for your company. But I’m sure, we all know a company that has an employee like this on the payroll. Don’t we?

As the business owner said, “So how do I get him out of here, Steve?” I hear that interrogative refrain from owners multiple times each week. This case was more sensitive than most, given the fact that the business owner terminated an employee last year, who sued the business owner for wrongful termination due to Age Discrimination (i.e., above 40 years old), and walked away with a settlement of over $40,000.

And your Managers still tell you they are too busy to do documentation?

Maybe not at your company. But I’m sure, we all know a company that has Managers who say that.

Back to the Sunshine State. The responses to the business owner’s plea for guidance typically fall into one of four categories, all underscored by your company possessing EPLI coverage: (1) termination with/out documentation, (2) put the employee on a 30-day Performance Improvement Plan, (3) offer the employee 1-2 weeks of pay to resign his/her position, or (4) use a Separation and Release Agreement.

Readers of this site are well-versed in the proper protocol for Option 1: Bereft of suitable documentation, terminate the employee for at-will reasons and keep your fingers crossed; or provide the probative, documentation to the employee and escort him/her off the premises. Option 2 represents the documentation that should have been completed six months ago, specifying desired goals, variant employee performance, a defined action plan replete with weekly follow-up to track improvement, and the contingency of potential termination. Option 3 is typically an informal negotiation balancing the employee’s amicable departure with a financial payment to ease his/her transition to the next employment setting.

Option 4, the Separation and Release Agreement (i.e., Severance Pay), is a formal, legal process that should be blessed by the company’s external legal counsel. Otherwise bound by state law, this document represents financial payment to an employee in response to a series of waivers granted by the employee to the company. Some waivers, acknowledgments, and clauses include the following: No Other Payment Due, No Admission of Liability, General Release of All Claims, Release of Age Claims, Waiver of Claims, Non-assignment of Claims, No Existing Claims, Agreement to Arbitrate, Severability, Ambiguities, Integration, Advice of Council, Waiver and Amendment and Modification of Agreement, Counterparts, Binding Effect, Confidential and Proprietary Information, Non-disparagement, and Effective Date.

Most importantly, the Consideration to Employee After Separation Date section specifies the payment amount (e.g., salary, bonuses, health care benefits), payment date, and format (e.g., lump sum, weekly) to be given to the employee, after s/he signs the Agreement and exceeds the seven-day Revocation Period.

What does that mean, Steve?

Legally, standard Separation and Release Agreements grant the employee up to 21 days to review and sign the Agreement, followed by seven more days to change his/her mind and nullify the signature. The employee only receives the severance payment after the Revocation Period has been exhausted.

I’m sure your company trains Managers on proper documentation and performance management, thereby rendering Separation and Release Agreements unnecessary. But I’m sure we all know a company that doesn’t.

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