Terminating the Employment Relationship

Without consideration, an agreement is unenforceable, regardless of whether it contains a severability clause (discussed below). For instance, an agreement that allows an employee to withdraw their termination appeal hearing will likely be considered unenforceable for lack of consideration, assuming the employee does not gain anything else of value, e.g., the ability to resign rather than be terminated. Because the employee can withdraw the employee’s termination appeal without an agreement, the employee is not receiving anything of value by entering into an agreement.

The most common form of consideration is payment of money. If money is to be paid as part of the agreement, the agreement should specify:

The amount to be paid, including any amounts to be withheld;

The manner in which it will be paid (e.g., by check? More than one check?);

The timing of the payment (e.g., 10 business days after execution of the agreement); T o whom it will be paid (e.g., to the employee, the employee’s attorney, both, etc.); Any conditions for payment (e.g., receipt of letter of resignation; receipt of file stamped dismissal of a civil action); and What the payment is for (e.g., emotional distress, back pay , attorneys’ fees, a combination, etc.).

With respect to the amount to be paid, an employer may want to, or be required by law to, specify what the payment is for. For instance, if the parties are resolving a disciplinary dispute and agree on a total amount of $30,000, with $10,000 of the total for back pay, the employer may specify the back pay amount in the agreement. This may be important for tax purposes, as the employer will be required to deduct payroll taxes from back pay . Plaintiff’s attorneys will often argue that the entire amount should be emotional distress damages, so the employee can avoid having payroll taxes deducted. Parties cannot circumvent tax laws simply by calling back wages emotional distress damages. This issue is discussed further below. The agreement should also specify the employee’s obligations and any other, non -monetary obligations created for the employer. As with payment provisions, the parties’ obligations and the time for performing them should be specified. 3. W AIVER & R ELEASE When resolving a dispute with an employee, an employer should always attempt to get a waiver and release of all claims from the employee or ex-employee. Ideally, an employee will waive and release all claims that exist, known or unknown, as of the date the employee executes an agreement. Such a waiver and release, if drafted correctly, provides the employer with protection from the employee executing the agreement, collecting payment or other form of

Terminating the Employment Relationship ©2022 (s) Liebert Cassidy Whitmore 98