Even in these days of labor shortage it sometimes becomes necessary to terminate unsatisfactory employees. The challenge then becomes: how to obtain agreement that departing workers won’t sue your company for perceived wrongs suffered under your employ.

The Bad News: In a landmark case, Oubre v. Entergy Operations, the Supreme Court ruled against the company, and found their waiver was invalid and payments they had made to obtain the waiver need not be repaid.

The Good News: along with their ruling came a 7-point test for drafting an airtight waiver/release, or at least one that the Court felt would withstand scrutiny. Our thanks to Paul Finkle of Western Employer Associates, a strategic business and human resources consulting firm in San Rafael (and no relation to our firm), for the information. The Court’s list:

Draft a clear, simple agreement avoiding excessive legal language and other terms that employees may not understand.

Specifically name the laws that you are asking the employee to waive (such as Title VII, ADEA, state and local ordinances, etc.).

Pay employees a "fair" amount for waiving their rights.

Advise employees, in writing and in the release, to consult with an attorney before signing the release.

Include statutorily required language, such as the language contained in the ADEA providing employees 21 days to consider the agreement before signing. (The Court said the employee could waive this period).

Indicate in the waiver that the waiver or release does not apply to any claims that may arise after an employee signs (e.g., the employee later claims the employer retaliated by giving a negative employment reference).

Include language that provides employees a 7-day decision period to back out of the deal after they sign.

It goes without saying that you shouldn’t try this at home. Have a good labor attorney draft your form (we can recommend several), but make sure all these points are covered. The money you save could be yours.