You are sitting in your office
and somebody pops their head into to say that the boss wants to see you. That’s
never a good feeling. It only gets worse when the boss tells you that the
company is firing you, letting you go, going in another direction or some other
euphemism for “get the hell out of here, you don’t work here anymore.” You
think to yourself, “I’ve was fired today! What am I going to do?” As your head
is spinning, the boss or manager offers you an out – here’s a severance
agreement that will give you some money until you find a new job and we can
agree that you resigned so it will not look like you were fired.
So, here is why you should not
immediately sign a severance or end of employment agreement: (1) the agreement
was drafted by their employment law attorney and it will not likely be fair –
it might even slip in terms that prevent you from accepting a new job in the
same field; (2) because most employers will not share any information about
your employment during background checks except the dates of your employment
and position held, the offer to change the designation from termination to resignation
is typically meaningless; (3) you do not know if the money being offered is
sufficient or fair; and (4) you will be required to give up any claims you may
have against your employer – even claims that you may not know that you have.
Employers think they can take advantage of newly fired employees because of
their mental state.
If your employer thought it was
important to have a lawyer at a big law firm draft a severance agreement for
you to sign, it is equally important to have an employment attorney review it
for you too. You have a right to ask for time to read it outside of the office
and to consult an attorney. Think about it this way, if the boss, manager or
supervisor says sign it now or no deal, it means that he or she really is
afraid about what an attorney is going to tell you.
If it is even possible that you
are being fired because of your race/color, religion, gender/sex, national
age, disability or pregnancy, or because you recently filed a
request for FMLA or a Workers’
Compensation claim, or you think it is retaliation
for whistleblowing, absolutely do not sign anything your
boss or manager gives you without talking to an employment attorney. You may be
forfeiting a very valuable wrongful termination claim. (See what Should I Do If I Was Wrongfully
Fired From My Job In Ohio?; Can
I Take Evidence With Me When I’m Wrongfully Fired? I Need Help From The Best
Employment Discrimination Lawyers; How
Do I Make An Employment Discrimination Claim?).
A commonly asked question that
attorneys are asked is whether we do severance agreement review or
contract review. The answer is yes! Our experienced employment lawyers
frequently review employment contracts and severance agreements to ensure that
they serve our clients in the best way possible. A common problem that we run
into when reviewing severance agreements is that employers try to sneak in
clauses that limit the employee’s right to bring a claim of discrimination
against their employer.
Under Ohio law, an employer can
include provisions in a severance agreement that prevent an employee from suing
the company or its management or severely limit the time or ability to do so.
This is called a release of claims. Employers can
include provisions that the employee cannot compete with the employer within a
reasonable distance for a reasonable time, which is called a non-compete
contract or non-competition agreement. Ohio law permits employers to contract
for an employee to waive any future commissions owed as part of a severance
agreement. Employers can put a provision in a settlement agreement that you
will not contact anyone you sold to as part of your employment – even to help
you find a new job or for a reference. Essentially, employers can do almost
anything they want as part of a severance agreement … but not anything as there
are some few limitations.
As our employment discrimination attorneys have previously discussed, Title
VII of the Civil Rights Act of 1964 makes it illegal for an employer
to restrict an employee’s right to file a charge of discrimination with the Equal Employment
Opportunity Commission (“EEOC”). (See Severance Packages and Employee’s Rights to File a
Charge of Discrimination with the EEOC.; and Should I Get My Severance Agreement Reviewed Before I
Sign?). Also, it is illegal to retaliate against an employee for
filing a charge of discrimination against their employer. Because of this, an
employer cannot place a term in a severance agreement that limits an employee’s
right to file a charge of discrimination with the EEOC after accepting the
terms of his or her severance package.
However, severance agreements
can state that employee can file with the EEOC but agrees to take no money from
any settlement with the EEOC – so what’s the point? Many employers,
particularly those who recognize that they may have a potential wrongful
termination case against them, will include this language. Sadly, often they
get away with it. When an employee is informed that they are about to lose
their job, many do not want to spend any extra time or money to have the
document reviewed by an attorney. It’s understandable, who knows when they’ll
get paid next? Saving a few hundred dollars now sounds like the safe bet.
However, foregoing legal counsel at an employee’s termination could end up
being more costly later on for that employee.
There is an interesting case from last summer, that serves as an example
of how a terminated employee could have saved money in the long run, had she
had an attorney review her severance agreement before signing it. Not only
could she have saved money, but her attorney also would have pointed out that
the severance agreement contained an unlawful clause and she was discriminated
In 2008, Jena McClellan was
hired as a telemarketer for Midwest Machining, Inc. She was quickly promoted to
inside sales. Jena was a hardworking, dedicated employee. Jena was liked by
everyone at work and consistently received good reviews. In 2015, Jena told her
boss that she was pregnant. Immediately things at work started to turn sour. Jena’s
boss made negative comments for weeks after the announcement about Jena’s
pregnancy. Jena’s boss also expressed that he was annoyed that Jena had to miss
so much work because of pre-natal appointments. Who is this guy? Pre-natal
appointments are just a fact of life. When a woman is pregnant, those
appointments are both foreseeable and necessary.
Roughly three months after Jena
announced she was pregnant, she was fired despite her many years of service to
the company and had no discipline record in over six years. What bothers our
employment lawyers the most about this story—aside from the blatant pregnancy
discrimination— is how she was fired.
On the day Jena was fired,
Midwest’s president called her into his office. He shut the door so that the
two of them were alone, he used a raised voice and a forceful tone and told her
that she was fired, effective immediately. He also told her that if she wished
to get any severance at all, she needed to sign the agreement right now. Jena
stated in her complaint that she felt pressured, bullied and unable to leave. The
president rushed through the severance agreement and brushed off questions that
Jena tried to ask. Jena signed the agreement without consulting an attorney and
without having time to review the contract on her own.
Whenever I hear instances like
this, my blood starts to boil. These coercive tactics have absolutely no place
in the workplace. It’s bad enough that Jena clearly being discriminated
against, but on top of that they are trying to coerce her into signing an
agreement, with God knows what in it. Every employee has the right to review a
severance agreement with an attorney before signing it. Full stop.
The agreement that Jena signed
without consulting a lawyer stated that she “waived any and all past, current,
and future claims” she had against Midwest. Under the severance agreement,
Midwest agreed to pay Jena $4,000, payable in eight weekly installments. It is
important to recognize that this type of language is pretty common in severance
agreements. However, the exact wording of the document matters a lot, and it
takes a trained eye to spot illegal versus legal clauses.
About a year later, in November
2016, Jena finally met with an attorney. Upon learning about Jena’s treatment,
the attorney immediately filed a lawsuit on her behalf. Understandably so, that
attorney was probably just as enraged as I was when I first read about her experience.
After her attorney sent the
Complaint to Midwest, at the advice of her attorney, Jena sent a letter stating
that she rescinded her severance agreement and returned the $4,000. However,
Midwest argued to the court that she couldn’t rescind the agreement, and that
Jena could not sue them because she did not “tender back” the monetary
consideration she received under the severance agreement before commencing her
lawsuit. Basically, Midwest argued that Jena was required to return the
severance money before she initiated
the lawsuit, and she returned the money a few weeks after she started the lawsuit. The District Court agreed. The
District Court held that even if the severance agreement was unenforceable
because it was signed under coercion or duress, she did not properly “tender
back” the severance money, and therefore, could not bring a lawsuit against Midwest.
Jena appealed to the Sixth Circuit Court
of Appeals. The Sixth Circuit agreed with Jena,
it held that “a plaintiff is not required to tender back consideration received
under a severance agreement before bringing claims for violations of Title VII
or the EPA.” Midwest argued that the whole point of “tender back” is to allow
contracts to function in market participant form. Where if one party were to
rescind a contract, they would have to return the benefit they were given
through the contract’s terms. Thankfully, and this is a big win for employees,
the Sixth Circuit explained that “Title VII was created precisely to combat a
deficiency in the market, namely inappropriate discrimination, which had the
effect of placing parties in unequal bargaining positions.” The court also
added that “we worry that required recently discharge employees to return their
severance before they can bring claims under Title VII would serve only to
protect malfeasant employers at the expense of employees’ statutory protections
at the very time that those employees are most economically vulnerable.”
the Sixth Circuit ruled that if an employee does not pay back their severance
prior to bringing a lawsuit, that severance money is to be deducted from any
judgment awarded to a plaintiff employee.
only thing Jenna won is the right to come back to that same trial court and
argue that she signed the severance agreement under unconscionable or very
unfair circumstances. As such, she still may lose based on the fact that she
signed the severance agreement.
decision reaffirms the idea that employers cannot bully their employees into
signing severance agreements. Everyone has the right to have their attorney
review contracts before they sign them, severance agreements are no different.
lucky. The Appellate Court agreed with her, and essentially gave her a second
chance to pursue her claim against Midwest. However, the fight was not won
without sacrifice. Long story short, the more a person has to litigate, the
more expensive the case becomes. In the case described above, Jena not only had
to pay for fees to file the complaint, and litigate it in the lower court, but
then she had to pay for the expenses of fighting it in appellate court. That’s
a huge gamble, and expenses add up fast. Even though the circumstances
surrounding Jena’s severance agreement were sketchy at best, we can all learn
from her situation when facing being wrongfully fired from a job.
Call an attorney right away before signing an employment contract or a severance
agreement. When employers offer different contracts to their employees, it is
not because the employer is worried about preserving their employee’s legal
rights. The employer is looking out for what is best for their business. Far
too often our employment lawyers see fired employees come in for a consultation
and they have signed away some of their rights because at the time they
“thought the company was a good company.” Get legal advice early on. Even
though it may seem annoying or expensive upfront, it can save you a lot of
headache and money later on.
If you are searching
“I need a lawyer because I have been wrongfully fired or terminated;”
or “I have been discriminated against or harassed based on my” race, national origin, gender, age, religion or disability; or even think that you might need an
employment lawyer, then it would be best to call the right attorney
to schedule a free and confidential consultation. Call our office at 866-797-6040. Spitz, The Employee’s Law Firm and its attorneys are experienced and dedicated to protecting employees’ rights and solving employment disputes.
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