ABA Banking Journal - December 2009 - (Page 32) Compliance Clinic What you should know about severance agreements Many companies offer packages in exchange for a liability waiver. They have to be set up properly and are not airtight W orkforce reductions and employee terminations have become all too common in this current economic climate. Businesses of all sizes continue to assess their economic and operational structure to decide whether it is necessary to reduce their workforce or institute temporary work schedules and salary reductions. However, an employer’s decision to separate certain employees while retaining others may lead some discharged employees to believe that they were wrongfully terminated or discriminated against on the basis of their age, race, sex, national origin, religion, or disability. To minimize the potential for employee litigation, many employers now offer departing employees severance packages or continued benefits in exchange for a release of liability (or waiver) for all claims related to the employment relationship. These would include discrimination claims under the civil rights acts enforced by the Equal Employment Opportunity Commission (EEOC), including the Age Discrimination in Employment Act (ADEA), Title VII, the Americans with Disabilities Act (ADA), and the Equal Pay Act (EPA). Employees are typically offered severance agreements and asked to sign a waiver at the time of their termination unless severance provisions were previously discussed and negotiated when the employee was initially hired, which is often the case for senior executives. Most signed waivers will likely be enforceable if they meet both contract principles and statutory requirements, but an employer cannot lawfully limit an employee’s right to testify, assist, or participate in an investigation, hearing, or proceeding conducted by the EEOC, or prevent an employee from filing a charge of discrimination with the EEOC. Additionally, an employer cannot lawfully require an employee to return money or benefits received in exchange for signing the waiver if the employee later elects to file a charge against the employer. Consideration must be present A severance agreement (also referred to as a “separation agreement,” “release agreement,” “termination agreement,” or “separation agreement general release and covenant not to sue”) is a contract between an employer and an employee that specifies the terms of the termination, such as a layoff. Like any other contract, a severance agreement must be supported by “consideration”—something of value to which a person is not already entitled that is given in exchange for an agreement to do, or Subscribe at www.ababj.com By Lloyd W. Aubry, Jr., and Armilla T. Staley-Ngomo, attorneys in the San Francisco office of Morrison & Foerster LLP— Aubry, Of Council (laubry@mofo.com), and Staley-Ngomo an associate (StaleyNgomo@mofo.com). 32 DECEMBER 2009/ABA BANKING JOURNAL http://www.mofo.com/index.html http://www.ababj.com Table of Contents for the Digital Edition of ABA Banking Journal - December 2009 ABA Banking Journal - December 2009 Contents Editor's Column Briefing ABA Resources ABA Chairman's Position Community Banking Pass the Aspirin CRE Pain Fraud Looms Large on BSA Menu Tech Topics Compliance Clinic Mailbox The Economy ABA Banking Journal - December 2009 ABA Banking Journal - December 2009 - ABA Banking Journal - December 2009 (Page Cover1) ABA Banking Journal - December 2009 - ABA Banking Journal - December 2009 (Page Cover2) ABA Banking Journal - December 2009 - Contents (Page 1) ABA Banking Journal - December 2009 - Editor's Column (Page 2) ABA Banking Journal - December 2009 - Editor's Column (Page 3) ABA Banking Journal - December 2009 - Editor's Column (Page 4) ABA Banking Journal - December 2009 - Briefing (Page 5) ABA Banking Journal - December 2009 - Briefing (Page 6) ABA Banking Journal - December 2009 - Briefing (Page 7) ABA Banking Journal - December 2009 - Briefing (Page 8) ABA Banking Journal - December 2009 - ABA Resources (Page 9) ABA Banking Journal - December 2009 - ABA Chairman's Position (Page 10) ABA Banking Journal - December 2009 - ABA Chairman's Position (Page 11) ABA Banking Journal - December 2009 - Community Banking (Page 12) ABA Banking Journal - December 2009 - Community Banking (Page 13) ABA Banking Journal - December 2009 - Pass the Aspirin (Page 14) ABA Banking Journal - December 2009 - Pass the Aspirin (Page 15) ABA Banking Journal - December 2009 - CRE Pain (Page 16) ABA Banking Journal - December 2009 - CRE Pain (Page 17) ABA Banking Journal - December 2009 - CRE Pain (Page 18) ABA Banking Journal - December 2009 - CRE Pain (Page 19) ABA Banking Journal - December 2009 - CRE Pain (Page 20) ABA Banking Journal - December 2009 - CRE Pain (Page 21) ABA Banking Journal - December 2009 - Fraud Looms Large on BSA Menu (Page 22) ABA Banking Journal - December 2009 - Fraud Looms Large on BSA Menu (Page 23) ABA Banking Journal - December 2009 - Fraud Looms Large on BSA Menu (Page 24) ABA Banking Journal - December 2009 - Fraud Looms Large on BSA Menu (Page 25) ABA Banking Journal - December 2009 - Fraud Looms Large on BSA Menu (Page 26) ABA Banking Journal - December 2009 - Fraud Looms Large on BSA Menu (Page 27) ABA Banking Journal - December 2009 - Tech Topics (Page 28) ABA Banking Journal - December 2009 - Tech Topics (Page 29) ABA Banking Journal - December 2009 - Tech Topics (Page 30) ABA Banking Journal - December 2009 - Tech Topics (Page 31) ABA Banking Journal - December 2009 - Compliance Clinic (Page 32) ABA Banking Journal - December 2009 - Compliance Clinic (Page 33) ABA Banking Journal - December 2009 - Mailbox (Page 34) ABA Banking Journal - December 2009 - Mailbox (Page 35) ABA Banking Journal - 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