Sometimes a reader’s comment is so on target that it’s worth its own post.
Fellow attorney Michael Moore of Russell, Krafft & Gruber, LLP, in Lancaster, PA, sent me the following comment concerning my December 2, 2007, post “Response to Reader’s Questions Regarding Severance & Separation Agreements.”
Chuck:
The strength of a severance agreement containing a nondisclosure agreement and release is always a question that businesses raise with me too. To improve the businesses chances of not getting into litigation, I suggest that any severance payment be made over time rather than in a lump sum. That gives the business the opportunity to stop payment if there is a problem and the former employee is not likely to sue if he is still owed money. I try to spread the payments out past the limitations period of filing an EEOC complaint, if possible. Repaying the money if you sue would be great; however, the tender back of consideration is problematic under the Older Worker Benefit Protection Act provisions of the ADEA. Sometimes, I will allocate some money to the nondisclosure portion of the severance agreement and provide that it must be repaid as liquidated damages if there is a breach or suit is filed.
One of the biggest problems with litigating breaches of nondisclosure agreements is that it can place customers in the middle of a legal battle which is really bad for business. Businesses should know this risk is there.
Michel is right. An installment or spread payment schedule is one of the best ways to prevent and discourage a breach.
Chuck,
I really enjoy all of the advice and comments about severance — however I’m trying to decide whether severance is necessary and when I should make the offer if need be. I’ll try to keep this as factual as possible. We’re a small company with less than 40 employees.
We have a 22 year employee, aged 43, who recently returned to work after a 16 month workers compensation absence — a total temporary disability claim.
We replaced the employee’s VP position with other employees, therefore a demotion to a much lesser position was implemented for the returning employee. The employees compensation was reduced by 30% and we needed to adjust the days off from two together to two split days off. The employee also missed the required “Spring window” for one of the four weeks of vacation so the employee was informed that there would only be 3 weeks allowed this year.
The employee did return to the job however we received a letter from the employee complaining of discriminatory action by the company in the form of harassment, retaliation and unfair treatment. The employee claimed that the company was retaliating for filing a workers compensation claim. The employee also complained that the we had sentiment of retaliation prior to his Return To Work indicating that we had publicly made statements that he would not be returning to work and that he was no longer an employee with us.
A few days later the employee approached us and mentioned that it was clear that he was no longer wanted by the owner and that he felt that it was clear that he is being pushed out of the company and asked for an exit strategy. We arranged a meeting and listened to what the employee had in mind.
I don’t think that we’ve done anything wrong. Based on what I’ve described do we need to provide an expensive severance agreement for this employee? I’m not quite sure what exactly this employee believes that he has legally against us. This employee will most likely quit on his own in due time. How long should we wait to respond to the employee?