Crack Down on Separation Agreements

Happy New year and welcome to LegalEase. Today we will talk about the government crackdown on separation agreements.

Separation agreements are very  common. They are often used after an employer terminates an employee, but the employee claims the termination was illegal. The employer and employee will usually negotiate a separation package or severance package. Prior to the employer making payment to the employee, the employer will ask the employee to sign a separation agreement to confirm that no other lawsuits or complaints have been made against the employer and the employee has not talked to any state or federal government agencies for the purpose of filing a claim against the employer.

However, this process will now be a problem. The SEC recently reviewed separation agreements used by a real estate firm and ruled that the agreements, containing this common provision, violates the SEC whistleblower statute. Basically, the SEC is saying that when an employer asks an employee to confirm there are no complaints and the employee has not  talked to a government agency, it discourages the employee from actually doing so.  Again, these provisions are common and used to help employers ensure that all complaints and claims are being resolved in this one package.

What are employers to do?

There are ways to get around this kind of ruling, and it’s important that you seek legal counsel to do so. You should make sure that your separation agreements have a carve-out provision.

Apparently other government agencies are following this ruling and expect to also rule that these provisions in separation agreements violate their whistleblower or retaliation statutes. Employers, please have your separation agreements reviewed by counsel.

If you need help, we can definitely add a carve-out provision to your agreements so that you do not run afoul of the rule and have liability exposure.

If you have any questions, give us a call. Our link is always in the bio. Thank you for joining LegalEase.