Back in September, our blog discussed how there will likely come a time for even the most diligent small business owners when layoffs or reductions in force prove unavoidable given major drops in profits or some other type of mounting financial pressures.

We also discussed that when this unfortunate day arrives, these small business owners must take steps to ensure that the ensuring layoffs or reductions in force are not discriminatory, meaning they do not result in the disproportionate dismissal of groups of employees otherwise protected by federal employment discrimination laws.

Once the difficult task of determining who will be laid off or subjected to a reduction in force is made, a small business owner may decide to ask these employees to sign waivers of discrimination claims, meaning formal agreements in which they promise not to pursue any discrimination complaints against their erstwhile employer.

While there is nothing technically illegal with asking soon-to-be-former employees to release their right to sue, the U.S. Equal Opportunity Employment Commission does indicate that there are certain rules that must be observed in order for these waivers of discrimination claims to be considered valid.

Consideration

First and foremost, the agreement must promise the departing employee some sort of consideration (i.e., something of value) in exchange for signing outside of that to which they are otherwise legally entitled.

For instance, a waiver of discrimination claims could offer a specific amount of money outside of any salary or other benefits they are already owed.

No waiver of future rights

While a waiver of discrimination claims can effectively limit the ability of a departing employee to sue based on past employment experiences, it cannot cover their ability to sue based on future employment experiences, meaning those things that happen subsequent to their signing.

An example given by the EEOC is an employee being subjected to sexual harassment after signing a waiver of discrimination claims. Here, it would not be a valid defense for the business to assert that the employee signed the waiver should he or she decide to file a lawsuit in connection with the harassment.

We’ll continue this discussion in our next post, exploring the other requirements that must be observed regarding waivers of discrimination claims.

If you have questions about this complex topic, or your rights and responsibilities as an employer in general, consider speaking with an experienced legal professional.