Terminating An Employee - Why Severance Agreements and Releases Are Critical

Even after an employee is terminated, legal risks do not end. Employers must carefully consider how they handle severance agreements, final pay, and post-termination communications. Federal laws such as the Older Workers Benefit Protection Act (OWBPA) impose specific requirements for valid waivers of claims, particularly for employees over the age of 40. Failure to comply with these requirements can render a release agreement unenforceable.

Severance agreements must be carefully drafted to include clear and legally compliant release language. For employees over 40, the OWBPA requires specific disclosures, consideration periods, and revocation rights. Employers who fail to meet these requirements may find that the employee retains the right to pursue legal claims despite signing the agreement.

In addition, post-termination actions—such as negative references, inconsistent communication, or failure to pay final wages—can create additional liability. Employers must ensure that all post-termination processes are handled consistently and in compliance with applicable laws.

Conclusion

The termination process does not end when the employee leaves the organization. Post-termination actions, including severance agreements and final communications, play a critical role in managing legal risk. Employers who fail to handle this phase properly may face continued exposure, even after the employment relationship has ended.

Call to Action for Business Owners

• Use legally compliant severance agreements
• Ensure compliance with OWBPA requirements for employees over 40
• Standardize post-termination procedures and communications
• Review all termination packages with legal counsel
• Maintain consistency in references and final pay practices