With the proliferation of the #metoo movement, companies are acutely aware of workplace sexual harassment and the costs and public relations nightmares it accrues. This is why many severance packages now include severance agreements that include California sexual harassment claim waivers.
Are the agreements enforceable?
Broadly, perhaps. Whether a severance or termination agreement is enforceable varies based on many factors. However, they can potentially, be enforceable. This is why courts will determine the validity of the contract first and then, the validity of specific provisions and waivers.
On such threshold issues is whether the California employee received adequate consideration for the discrimination waiver. Often, employers will try to pad severance packages with entitlements to which the employee is already entitled, like their pension, vacation time, sick leave, etc. However, an employee entitlement cannot be used to compensate for a discrimination waiver.
Other contractual defenses
A common defense against discrimination waivers is general contractual defenses, like fraud, duress, undue influence or other improper conduct by the employer. A common argument is duress, where the contract was not voluntarily. This commonly happens when the person receiving the severance agreement is the sole breadwinner for their family. As such, the employee argues that they did not have a choice on whether to sign the agreement because of their family’s reliance on them financially. Unfortunately, this is not usually a successful defense.
A knowing and voluntary waiver
A waiver-specific argument against enforcement is that the severance agreement itself or the discrimination waiver was not knowingly and voluntarily entered into by the employee. The rules for proof on this vary based on the statute. For a sexual harassment claim under Title VII, some courts rely on traditional contractual principles.
However, most courts look beyond this and consider the totality of the circumstances. This includes whether the discrimination waiver was clear and specific enough for the employee based on their education and experience. They also look to the amount of time given to the employee to decide whether to enter into the agreement, whether the employee encouraged or discouraged attorney consultation and if the employee did consult with an attorney.
Courts also look at whether the employee negotiated the agreement or had input into it and the level and amount of consideration given to the employee considering the nature of the waivers.