I have just been terminated as part of a large RIF at a company in CO and have been offered a severance package that includes salary continuation and payment of accrued vacation time. However, the company is requiring me to sign a waiver not to sue before they will payout the severance. The company handbook clearly states that it is company policy to pay salary continuation and gives a payout schedule based on years of service. It does not say that a waiver will be required. They are claiming that the severance constitutes “valuable consideration” and they will not pay them without the waiver being signed. Also, the V.P. of HR from the current company has told me that they offering salary continuation as a way to meet the two week minimum requirement for WARN so that they don’t have to issue letters to all employees that are impacted; this hardly seems like “valuable consideration.”

I’ve read the ADEA law (Yes, I'm over 40) and, if I’m reading it correctly, if the company handbook states that salary continuation will be paid, then that does not count as “valuable consideration” and, regardless of the situation, I don’t think they can holdup payment of earned vacation. Can they?

I’ve been through this before with a previous employer and they offered an additional monetary amount as “valuable consideration” to incentivize terminated employees to sign the waiver. So, my basic question is, can they tie salary continuation which has always been standard company policy, and which, in part, is used as a way to avoid WARN letters, and vacation pay to signing of the waiver?

Thanks in advance for your help.
D

A pre-existing obligation is never valuable consideration. The tricky part is determining if there was a pre-exisiting obligation to pay severence.


First, you should figure out if you have a claim against your employer worth persuing. If you do, then decide if you want to no sign the waiver; or sign the waiver, collect the severence and try to argue defective formation when you sue. If not, then go ahead and sign the waiver.

As for the WARN issue, I refer you to this excript from the DOL WARN Guide for Employers: (http://www.doleta.gov/layoff/warn.cfm)

PAY IN LIEU OF WARN NOTICE
Can I pay my workers their salary and benefits for 60 days in lieu of notice?

Neither the Act nor the regulations recognize the concept of pay in lieu of
notice. WARN requires notice, making no provision for any alternative.
Failure to give notice does a significant disservice to workers and undermines
other services that are part of the purpose of the WARN Act. However,
since WARN provides that the maximum employer liability for damages,
including back pay and benefits, is for the period of violation up to 60 days,
providing your employees with full pay and benefits for the 60-day period
effectively precludes any relief.



What if I pay my workers for 60 days in lieu of notice and then an employee
gets another job within what would have been the notice period, am I
required to continue making payments to the employee through the notice
period?

No. If an employee gets another job within the 60-day period, this is viewed
as a voluntary termination that makes the employee ineligible to collect damages.


Can severance pay offset WARN damages?

WARN allows "voluntary and unconditional" payments that are not "required
by any legal obligation" to be offset against an employer's back pay liability.
In many cases, however, severance pay is required by contract, including an
employer's personnel policies and handbooks. These payments do not offset
WARN damages and thus would not serve as pay in lieu of notice.

Thanks for the quick response!

Sounds like they've for sure got a WARN problem. That will be interesting.

I have asked for a copy of the employee handbook as they would not let me take it when I left, but I’m 100% sure that it does not state that a waiver is required to get salary continuation and that salary continuation is standard policy.

I’ve also asked for a list of every salaried employee’s age and job title (not name). I think I’m entitled to that under ADEA. However, I’m pretty sure I don’t have a claim.

My point is, I don’t want to sign the waiver to release my legal rights, regardless of any likelihood of a legitimate claim, unless they offer additional incentive.

It is my understanding that in Colorado earned vacation is considered earned wages and they can not hold that back regardless. Is this true?

Yeah, CO is a earned vacation payable upon termination state.


Here's (http://www.winston.com/siteFiles/publications/ADEAReleaseDisclosureRequirements09-2005.pdf) an interesting article on ADEA waivers. I would not go out of my way to help them correct a defective waiver, especially if I was concerned about perserving my rights. At some point you may want to be pragmatic.

The EEOC also forbids "tender back" provisions, so you can't be forced to repay your severence if you challange it in court.

Take a copy of the waiver unsigned to an attorney for review. Only then can you be sure if it is worth signing or not.
JoeC

I suggest you take the document to a local attorney for review. Since you are over age 40, the employer must give you at least 21 days to sign.

If a contract or policy/practice (separate from the severance agreement) specifies that accrued vacation will be paid upon termination, then the employer must do so for you, too

BTW, waivers are very common for severance packages.

I didn't see anything specific in your original post that would lead me to believe the WARN act would apply. Is an entire facility being closed? How many people are being laid off?

I just finished speaking with an attorney (yep, even on a Saturday she returned my call!). I will be reviewing the letter with a local labor attorney next week, but here is what she said.

1.) In CO, accrued vacation is considered earned wages so they must pay them. No question at all about that. Payment of earned vacation can not be tied to a waiver of any kind. At the very least they need to take that condition out.

2.) If salary continuation is a standard policy outlined in a policy manual and the manual does not say it will be contingent on signing a waiver or release, then it is not classified as “valuable consideration.” As I mentioned before, the manual does specify the salary continuation policy and it is a standard practice and it does not mention the requirement to sign a waiver.

3) The WARN issue is much more complicated and the need for WARN letters is yet to be determined. If 33% of the workforce that has been employed for at least 6 months on a full-time basis is let go, then a letter is required. The company was taken over by a consultant group to decide if it can be turned around or must be shutdown. I was told by the lead consultant that they intend to reduce the labor cost by 30%. That, of course, does not necessarily mean a 33% layoff, but it might. BTW, the company has 637 employees. So, I guess my answer to your question is, I don’t know if the entire company is closing or not, but I think by now they have a pretty good idea if the company is salvageable so the timing of when they know might be important within the next couple of weeks.

That’s my update on this thread. I appreciate all of your help as it convinced me to call the attorney.

We are here to help buddy.
JoeC