Separations Agreements Conditions
Case #4 Elizabeth Salsbury, a speech language pathologist employed by SunDance, was notified by letter from SunDance dated February 26, 1999, that the company was compelled to reduce its workforce and that Salsbury’s job would be terminated effective March 1, 1999. The letter informed Salsbury that she would receive 80 hours’ worth of severance pay after signing a separation agreement and general release.A provision of the agreement stated, “This Release and covenant not to sue also expressly, and without any limitation of the foregoing General Release, includes bot is not limited to any claims which Releasor may have or may assert under federal or state law prohibiting employment discrimination and claims growing out of any legal restrictions on the rights of Company to terminate its employees, whether statutory or arising under common law, including without limitations: Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act. Releasor on behalf of herself and other releasers expressly agrees that she will not institute, commence, prosecute or otherwise pursue any proceeding, action, complaint, claim, charge or grievance against Company or any other released parties in any administrative, judicial or other forum whatsoever with respect to any acts or events occurring prior to the date hereof in the course of Releasor’s dealing with Releasee.”Salsbury decided not to sign the Separation Agreement.Question: Can severance pay be given conditional to the employee’s promise to forego proceeding under Title VII of the Civil Rights Act and/or the Americans with Disabilities Act? Explain.
Separations Agreements Conditions
The separations agreement and settlement of severance pay cannot be effected on the condition that the victims will forego proceeding under the Title VII of the Civil Rights Act and/or the Americans with Disabilities Act without signing agreements to avoid social, ethical and legal conflicts. Therefore, in such arrangements, the employees accept the signing of a separation agreement and accepting the severance freely without invoking provisions of the law against the employer. Equally important, the civil rights and American with Disabilities Act prohibit outlaws the discrimination of employees based on their different conditions in employment or labour. In this case, Elizabeth Salsbury an employee of SunDance received a letter from her employer that they intended to reduce the workforce and would terminate her effectively together with other employees. Salsbury was to receive severance pay upon signing the separation agreement and the general release (Goldman, 2010). The separation agreement expressly stated that the laid down employees would not sue the employer based on the legal provisions such as the Civil Rights Act or American with Disabilities Act that prohibit discrimination. Salsbury together with other employees agrees to adhere to the provisions of a separation agreement that they would not institute any legal action. However, Salsbury made a decision not to sign the separation agreement. The action of Salsbury of not signing the separations agreement raises a question on whether the severance pay can be made to her merely based on the promise to forego all legal proceedings based on employment discrimination.
SunDance or any other organization would not make severance payment without signing of the Separation risks and merely on a promise to adhere to agreed provisions. First, a separation agreement is used as an exclusion from the proceeding legal liabilities that can be genuinely raised by the client. The separation agreement protects the SunDance from conflicting with the employment laws that touch on discriminations (Yermack, 2006). In this case, the reduction of the workforce will be done selectively and it will raise a question on the formula or approach used in the laying off workers. The issues of discrimination are likely to arise and they are legally protected under the Civil Rights Act and Americans with Disabilities Act. Therefore, the company will, by all means, avoid such legal conflicts with the employees by letting them sign the separation agreement before severance payment is given. Giving Salsbury severance pay without signing the separation agreement is a risky exercise since she can institute legal claims and forego the previous promises made (Rusticus, 2006). Therefore, separation agreement plays the role of an exclusion arrangement from legal liabilities on discrimination of employment that can be used and thus the company would not pay severance payment based on promises without signing the agreement.
Legal claims on discrimination in employment are costly to an employer that losses such cases. This fact makes matters worse especially if it is a team of employees and not a single employee. In this regard, the employees take great caution in handling issues of sacking and laying off workers for different reasons (Goldman and Huang, 2014). In the case, an employer loses an employee discrimination case they are punished with hefty fines and settlements to the employees. In such a case, SunDance is reducing its workforce and selectively laying off workers will raise issues of discrimination in employment. To avoid conflicting with the law SunDance opted to pay severance after the signing of a separation agreement and general release. The approach ensures that the employees laid off are reasonably compensated for the loss of employment and other inconveniences and will not raise legal claims later. Therefore, the company will not pay severance to Salsbury without signing the separation agreement since she can raise legal claims later and in case such cases are lost the company would suffer hefty fines and compensations to their employees.
The separation agreement ensures that there can be reconciliations and resumption of duties later even after workers are laid off. The separation agreement ensures that there is a continuation of a relationship even after employees are no longer working for the employer (Holzmann et al., 2011). The separation agreement ensures that employers and employees can peacefully end their relationship without legal conflicts and other issues that can affect the current and future relationship. In this circumstance, workers are a raid of through signing of the separation agreement and receiving severance pay to ensure smooth reductions of the workforce. If the [process is not followed the employees can raise legal claims on termination based on discrimination thus affecting future interactions. Future interactions are vital as the company can require more employees and recall laid-off employees. However, if there were legal conflicts there would not consider their former employees. Therefore, the company would not make severance payment without the signing of the separations agreements to ensure smooth laying off of workers and continued relations between the employee and the employer.
In conclusion, the SunDance Company will not risk or make a mistake of paying severance fees to former employees without signing a separations agreement. A mare promise to abide by the provisions and details separations agreement without signing it will not be admissible to allow the payment of severance since the employees can disregard their promise later and sue the organization based on discrimination. The SunDance would not pay severance before signing of the separation agreement and general release to prevent legal claims in future, costly legal battles and enhance continued relations even after the separation.
References
Goldman, E. M., & Huang, P. P. (2014). Contractual vs. actual separation pay following CEO turnover. Management Science, 61(5), 1108-1120.
Goldman, E., & Huang, P. (2010). Contractual versus actual severance pay following CEO departure. Unpublished Manuscript, Indiana University.
Holzmann, R., Pouget, Y., Vodopivec, M., & Weber, M. (2011). Severance pay programs around the world: history, rationale, status, and reforms. World Bank.
Rusticus, T. O. (2006). Executive severance agreements (Doctoral dissertation, University of Pennsylvania).
Yermack, D. (2006). Golden handshakes: Separation pay for retired and dismissed CEOs. Journal of Accounting and Economics, 41(3), 237-256.
