24 JULY / AUGUST 2017 HUMAN RESOURCES Debra A. Mastrian Partner SmithAmundsen LLC dmastrian@salawus.com SmithAmundsen LLC is a Diamond Associate Member of the Indiana Bankers Association. Article author Regulatory agencies, including the Equal Employment Opportunity Commission, the National Labor Relations Board (NLRB) and the Securities and Exchange Commission (SEC) continue to review severance agreements. Severance agreements, which are legal contracts or agreements specifying the terms and conditions of an employee’s termination, are also known as “separation” or “termination” agreements. The provisions of those agreements that draw the most scrutiny from regulators are waivers or releases of claims, confidentiality requirements and nondisparagement clauses. Attempts to interfere with an employee’s right to file an administrative charge, report a violation of the law, communicate with government agencies, or participate in agency investigations are troublesome. With respect to waivers or releases of claims, it is important to remember that, while an employee may waive or release a claim, the employee may still file an administrative charge, such as a charge of discrimination or an unfair labor practice, or a whistleblower action. Any attempt to waive those rights is unenforceable and may subject an employer to significant fines. Even though the employee’s right to file an administrative charge or whistleblower action is protected, in the event the employee files a lawsuit, or if the agency files a lawsuit on behalf of the employee, the employee can be required to waive any right to individual relief (i.e., compensatory damages and reinstatement). The agreement may not, however, limit the employee’s right to receive financial incentives for information provided to the government agency in the case of whistleblower actions. Therefore any waiver or release of claims must be carefully drafted to include an appropriate carve-out for administrative charges and whistleblower actions. If an administrative charge or action is pending at the time the severance agreement is being negotiated, an employer should not condition payment of the severance or termination pay on a withdrawal of the charge or action. Instead, the employee should be required to notify the agency of the agreement, and to complete and return an appropriate agency withdrawal form. Confidentiality or nondisclosure provisions must also be carefully drafted. Such provisions may be unlawful if they are overly broad in terms of the covered information, or if they impede or undermine an employee’s communication with a government agency. Confidential information should be limited to trade secrets and other nonpublic proprietary business information, rather than all company and employee information. Requiring an employee to give notice in the event the employee receives a request for confidential information pursuant to a subpoena or other legal process is viewed with disfavor. If such a notice requirement is included in a confidentiality provision, it should contain a caveat: “to the extent allowed under the law.” An express statement that nothing in the confidentiality or nondisclosure provision (or any other provision of the agreement) is intended to, or should be construed to, prohibit the employee from reporting conduct or providing information to a government agency, or participating in an investigation, or exercising any Severance Agreements Avoiding scrutiny from regulators
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