Florida businesses may decide to offer a severance package when terminating an employee. Florida companies may choose to offer a severance package or severance agreement to an employee in exchange for the employee waiving her right to sue the employer. Some Florida businesses call these indemnity agreements, indemnification agreements, compensation agreements, golden handshake agreements, or termination agreements.
Recently a Florida federal judge for the Middle District of Florida had to decide whether an employee was allowed to sue her employer for things that she waived in a severance agreement that she signed.
At the beginning of the lawsuit, the Florida employer filed a Motion to Dismiss portions of the lawsuit, arguing that the employee waived her right to sue for those things by signing the severance agreement. Specifically, her claim for retaliation, and also a claim for attorneys’ fees, expenses, and costs.
The Florida employer’s argument was that these claims were barred by the waiver and release contained in the severance agreement the employee signed in connection with the termination of her employment.
The severance agreement at issue provided that the company would pay the employee the following: (1) two months’ salary, (2) a lump sum payment equal to all unused paid time off that the employee had accrued, and (3) a two-month continuation of the employee’s vision, health care, medical, and dental insurance benefits with the company.
In exchange, the employee agreed to release the company and its parents from any and all claims, which the employee ever had whatsoever against the company from the beginning of time to the date the employee signed the Florida severance agreement.
In analyzing the matter, the Florida court noted that the release explicitly included all claims arising out of, or relating to, the employee’s employment with the company and the termination of her employment with the company. The Florida court also noted that the severance agreement provided the employee with at least 21 days to consider the severance agreement and seven days to change her mind after she signed it. Further, the severance agreement included language advising the employee of her right to consult with an attorney prior to signing the severance agreement. Also, the severance agreement also contained, in bold, all-capital letters just above the signature lines, the following:
THE UNDERSIGNED HAVE CAREFULLY READ THIS SEVERANCE AGREEMENT AND HAVE NOT BEEN COERCED INTO SIGNING IT; THEY UNDERSTAND ITS CONTENTS AND THEY FREELY AND VOLUNTARILY AGREE TO ABIDE BY ITS TERMS.
The court noted also that the employee took three weeks to sign the severance agreement.
When the employee sued the Florida employer, she argued that she was coerced or forced into signing the severance agreement. The Florida court analyzed this claim by explaining that a waiver of remedial statutory rights in Florida must be scrutinized by a court by looking at the totality of the circumstances to ensure that the release was knowing and voluntary. The court explained that this involves several objective factors, including:
1. the employee’s education and business experience;
2. the amount of time the employee considered the agreement before signing it;
3. the clarity of the agreement;
4. the employee’s opportunity to consult with an attorney;
5. the employer's encouragement or discouragement of consultation with an attorney; and
6.the consideration (e.g., money) given in exchange for the waiver when compared with the benefits to which the employee was already entitled.
When the Florida court applied these factors to this case, the Court determined that:
1. the employee was educated, as she had a Bachelor of Science degree;
2. the severance agreement gave the employee 21 days to consider the severance agreement before signing it and an additional seven days to revoke her consent (change her mind);
3. the severance agreement plainly and clearly included all claims arising from the employee’s employment and her termination;
4. the severance agreement advised the employee of her right to consult with an attorney before signing the severance agreement, which the employee had time to do because she did not actually sign the severance agreement until three weeks after her termination date; and
5. the employee was given an additional two months of salary and insurance benefits and a lump sum payment for paid time off to which she would not otherwise have been entitled.
In light of the above, the Florida court ruled that the totality of the circumstances indicates that the employee accepted valuable consideration in exchange for her knowing and voluntary relinquishment of the claims described in the severance agreement. United States ex rel. the employee v. HealthSouth Corp., No. 8:14-cv-2769-T-33AEP, 2019 U.S. Dist. LEXIS 146351 (M.D. Fla. Aug. 28, 2019).
Florida businesses should understand from this case several issues:
A. Florida employers should not rush the employee by trying and make them sign the severance agreement immediately when it is placed before them. The more time the employee has to consider signing it, the better the chance a Florida judge will find that the employee’s release (of legal claims they may sue on) was knowing and voluntary.
B. It is crucial to offer the employee something more than what they are already entitled to. As an example, if your employee handbook says that the employee is entitled to all accrued paid time off (PTO) upon termination, then you need to offer the employee something more than the value of the PTO.
C. Florida businesses will also be advantaged if they give the employee an opportunity to consult with an attorney prior to signing the agreement. The employee does not actually have to talk with a lawyer, but the key point is whether they were given the opportunity to do so. Of course, if you are asking an older worker to waive their age discrimination claims, then you are required to do this, and several other things too.
On January 9, 2020 the Federal Trade Commission’s Rebecca Slaughter discussed non-compete provisions in employment contracts and whether the FTC should initiate a rulemaking to address unfair or anti-competitive use and enforcement. Specific examples she listed that concerned her were: a Florida security guard was blocked from working as a security guard in all of Florida, summer camp counselors couldn’t work for competing camps, an hourly laborer shoveling dirt for an environmental drilling company was prevented from seeking a higher paying job at competing firm, low-level customer service employees at a check-cashing business were bound by non-competes, and coffee shop baristas couldn’t work for another coffee shop.
If your Florida business is considering terminating an employee – whether by firing or lay-off, you should consider whether it would be advisable to offer that employee a severance agreement in exchange for them waiving their right to sue your Florida company for various things, such as employment discrimination, harassment, retaliation, etc.
If you need help in drafting such an agreement, that is a service that the Law Office of David Miklas regularly provides to Florida employers. You can have the peace of mind knowing that an experienced Florida labor & employment attorney drafted the severance agreement and tailored it specifically to the needs of your organization for the specific matter that you are facing.
Email us or call us at 1-772-465-5111.
Florida businesses using severance agreements. Employment law update.