Charging for a Free Promise Can Land You in Court

As many of you know, we are not fans of the free ride on severance.  If you want to offer your employee a softer landing and some severance at termination — you might as well get a release for your money. But as an employer in Tennessee recently learned, you cannot promise the money and then come back for the release.  Henry v. Federal Reserve Bank of Atlanta, 12-cv-1282 (M.D. Tenn. Mar. 17, 2014).  Here the employer had a severance policy (usually a bad idea for a host of other reasons — I’m happy to discuss if you want to learn more!) promising severance at termination.  Employee is terminated after he filed a charge of discrimination.  Employer said something to the effect of — oh yeah, about that severance we promised in our policy, first you have to sign this release.  The Court said not so fast.  The Employer still owed the severance, but the employee could use it to fund his on-going discrimination claim and got a bonus retaliation claim to boot.  Employers everywhere should think about whether a generic severance policy makes sense for their company, and should always proceed with caution when offering severance.

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