A severance agreement, sometimes referred to as a “waiver of a right to sue,” is a type of contract that an employee may be asked to sign by their employer after the employee has been terminated or laid off during the downsizing of a business.

The effect of signing such a waiver, however, means that the employee will no longer have a right to sue their employer for wrongful termination. Instead, the employee will receive some sort of benefit (usually a severance package) in exchange for giving up their right to sue. In other words, the employee will have no means of legal recourse against their employer. Thus, they will not be permitted to recover any type of legal remedy from them in court.

As an example, suppose your employer ignored the procedure for firing employees at your place of work. After you receive your termination letter, your employer then asks that you sign a waiver of a right to sue in exchange for a severance package. If you sign the document, you will not be allowed to file a lawsuit against them for wrongful termination in court.

On the other hand, if you refuse to sign the document, then you may be able to recover monetary damages from your employer if you are able to prove that you were wrongfully terminated from the company. For instance, if your employer did not follow the steps to terminate a worker at your company or blatantly breached the termination provisions of your employment contract.

In such a case, so long as you do not sign the severance agreement, you will still have a right to sue your employer for wrongful termination. Ultimately, the choice will be yours alone on whether you want to file a lawsuit against your employer or if you prefer to take the offered severance package and give up your rights to sue after being terminated.

This decision is not one that should be made lightly. This is because you are essentially agreeing to release a valuable right that may be able to get you more money than you would receive if you simply walk away and opt to take a severance package.

Therefore, if you have been asked to sign a waiver of a right to sue and are having trouble deciding which option is better for you, then you should speak to a local employment attorney immediately for further legal advice. An attorney will be able to provide you with important information that can help you make an educated decision about your particular situation.

Can My Employer Make Me Agree Not to Sue in Exchange for Severance Pay?

There is no law that says that an employer is legally required to offer a severance package to an employee who has been laid off or terminated from a company. However, many employers will offer an employee who is in such a situation the chance to sign an agreement in exchange for severance pay regardless. In fact, it is a commonly employed tactic among businesses to save employers the cost of litigation and it is legal.

For instance, employers are well aware that their employees have a right to sue them for wrongful termination or other related employment claims in certain situations. To avoid having to pay a large monetary damages award, it is often cheaper for the employer to offer an employee a severance package that ensures the employee will be forced to abandon their right to sue.

Again, this process is considered to be legal. While an employer cannot force an employee to give up this right, they are still legally allowed to offer it to them. The decision will be in the employee’s hands from that point forward.

Thus, it is important that an employee understand their rights and what they will be giving up once they sign a waiver. Employees who are unsure of how to handle this type of situation should contact a local employment attorney immediately.

When Is a Waiver of a Right to Sue Invalid?

As discussed above, it is generally legal for an employer to ask an employee to sign a waiver of a right to sue in exchange for a severance package. However, there are two situations in particular when a waiver of a right to sue will be considered to be invalid or illegal. In most cases, a waiver of a right to sue will typically be found to be invalid or illegal in the following two situations:

  • Unknowingly or involuntarily: An employee will still be permitted to sue an employer if it is discovered that the employee was forced to sign a waiver of a right to sue. Such actions may result in an inequitable or invalid waiver. An employee will also be allowed to sue if they voluntarily signed the waiver, but did not realize or comprehend what it was they were actually signing (e.g., they did not know they were giving up their rights). In such a scenario, the waiver will be deemed invalid and therefore unenforceable.
    • In order to prove this, the employee must be able to show that they signed the waiver either while they were under duress or as the direct result of another wrongful action taken by their employer. For example, if an employer intentionally drafts a waiver using vague terms and confusing legal jargon.
  • Employment discrimination: An employee will also be permitted to sue an employer for employment discrimination, regardless of if they signed a valid waiver in a knowing and voluntary manner. Employment discrimination claims may occur when an employer terminates an employee based on their race, sexual orientation, gender, age, or because of a disability.

Can an Employer Withhold My Paycheck or a Severance Package If I Don’t Sign a Waiver of a Right to Sue?

An employer is not legally allowed to withhold an employee’s final paycheck. The reason for this is because the employee has already completed the work and thus is entitled to be paid for any work that was previously performed before they were terminated. An employer who refuses to give an employee their final paycheck can be sued for this action because it is illegal.

In contrast, an employer is not legally required to offer a laid off or terminated employee a severance package. As such, an employer is legally permitted to withhold severance pay from an employee who refuses to sign a waiver of a right to sue document. However, there are some exceptions to this general rule of thumb wherein an employer may be bound to offer severance pay to an employee.

For example, if a company policy or employee handbook states that any employee who has been terminated or laid off must receive a severance package. An employer may also be required to provide a severance package when an employment contract specifically says that one will be offered or if an employee is a member of a labor union and there is a collective bargaining agreement in place that has a condition regarding severance pay.

In addition, an employer also cannot force or threaten an employee to sign a waiver of a right to sue. Again, this decision will be left up to the employee and any conduct that takes away their choice, such as signing a severance agreement under duress, coercion, and/or undue influence, will be considered to be illegal.

Do You Need a Lawyer?

If you have been asked to sign a waiver of a right to sue after recently being terminated by your employer, then you may want to consider speaking to a local wrongful termination attorney for further legal guidance as soon as possible.

An experienced employment attorney will be able to determine whether there are any options for legal recourse against your employer. They can help you decide if it would be in your best interest to pursue those claims. Your attorney can also discuss your rights and legal obligations should you decide to accept the severance package that your employment may have offered you instead.

In addition, if you have already signed a waiver of a right to sue document, your attorney can review the terms and can check that it is legally valid and enforceable. Your attorney will be able to represent you in court if you should decide that you want to file a lawsuit against your employer as well.