How to Use a Release of Claims in the Workplace

Explaining a Release of Claims

John Wildgoose / Stone / Getty Images 

The release of claims is an agreement between an employer and a worker whose employment has been terminated. Employees typically sign the document in return for a severance package. The release is meant to limit potential litigation for reasons such as discrimination.

Used at Employment Termination Meetings

A release of claims also limits a former employee's ability to talk disparagingly about the company. With a properly written non-disparagement clause, if the former employee bad-mouths the company, they lose the severance. Make the severance offer reasonable and the company is protected against both litigation and public disparagement.

The release of claims is an integral component of an employment termination meeting. For former employees over the age of 40, the release of claims includes an age discrimination clause in which the employee agrees not to charge the employer with age discrimination.

Legal Considerations for a Release of Claims

The employer must inform the employee they have a certain time period to decide whether to accept the severance and sign the release. For instance, it is 21 days in Michigan, but varies by state. Following the signing of the release, the employee has seven additional days in Michigan to reverse their decision. Make certain you are familiar with the laws that govern a release of claims in your jurisdiction.

Employers generally suggest the employee seek legal counsel to understand their available options. An attorney can review the legal implications of the release of claims agreement before the employee signs the document.

Terms and conditions of the release of claims differ by state and country, so be sure to seek the counsel of an attorney in your state or nation to ensure your legal compliance. The information highlighted in this article uses Michigan release of claim groundrules.

How to Present the Release

The release of claims is presented at the employment termination meeting along with the severance offer. A fired employee is generally emotional and often willing to sign anything at this meeting. It is recommended never to accept the signed document at the termination meeting. Advise the employee to use the time the law allows to review the agreement and seek legal counsel.

You also want to ensure that your handling of the termination is legal, ethical, and empathetic.

Reassure the employee your offer will not change if the employee takes the maximum time allowed by law to seek help from an attorney, review the document, and decide whether signing it and accepting the severance package are in their best interest.

Employers can obtain a standard release of claims for employees under age 40 and for employees over age 40 from their employment law attorney. Any practicing employment law firm can provide a standard release and modify it for your company for a small fee.

Have the attorney review the release of claims at the same time they review the rest of the employment termination paperwork. Even if you have used the release of claims document in prior terminations, make sure the circumstances are the same and merit the same document.

In all legal matters, have your employment law attorney review the paperwork. This review ensures you have adequately protected your employer's interests.

EEOC Challenges to the Release of Claims

The release of claims has traditionally been used as a way to limit litigation, resolve possible disputes between an employer and an employee, and to finalize the ending of the employment relationship.

It bears mentioning, however, that recent decisions in Equal Employment Opportunity Commission (EEOC)-filed court cases raise the possibility these agreements have limitations going forward.

In 2018, the EEOC ruled that employers must leave employees with the option to file a complaint with the EEOC and expressed concern about the breadth of separation agreements. In a case involving an employee with a disability who was dismissed, the EEOC ordered the terminating employer to revisit its severance agreements with other employees as well. It did not find that the company in question had discriminated, but took issue with the language in the release of claims.

Attorney Teresa M. Thompson of Fredrikson & Byron, in Minnesota, cautions current documents may not protect an employer from a discrimination lawsuit. If this trend continues, organizations may want to re-examine their practice of offering severance to fired employees.

Again, because the law changes continuously, review by an employment attorney should be part of your standard procedure in any termination proceedings.

Disclaimer: Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a worldwide audience, and employment laws and regulations vary from state to state and country to country. Please seek legal assistance, or assistance from State, Federal, or International governmental resources, to make certain your legal interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.­ only.