Can companies demand employees sign a severance agreement for last pay?

April 12, 2013 4:54 AM

A good friend left a company I work with under weird circumstances and said he's not allowed to discuss it the terms of his severance, but seems really unhappy and bitter about it. Through the comments of other people at the company, I strongly suspect that the "severance" he had to sign a nondisclosure agreement for is actually only pay he was legally owed - pay for his unused vacation time and reimbursements for authorized expenses while on the job. If this is true, was it legal for them to demand this in exchange for cutting him his last check? Bonus: what is his legal recourse if this happened some time ago?

I also believe the agreement contained a nondisparagement clause, and they did not give him a copy of the agreement when he signed it. This happened over a year ago, but I just became aware of some of the details recently.

I know that his wife believes he signed it in some way "under duress", and I suspect seriously shady shenanigans were involved. I know he should have got an employment lawyer to look it over, demanded a copy, etc, but that was not an option financially at the time.

Two questions:
1) Was this legal? Both for my friend, and also for my own moral understanding of whether what the company did was just shitty, or they actually knew they were doing wrong.
2) Does he have recourse?

posted by corb to Work & Money (18 answers total)

IANAL. But I went through a recent similar experience.

Your employer must give you your back pay and unused vacation pay along with any other residual money owed within a certain time period after separation. Usually it's the next pay period or a certain number of weeks. My state has a very specific and clear law about this.

A severance agreement is NOT needed to get this pay. If an employer decides to withhold it until you sign something, they are in violation of the law and you can pursue action through your state's department of labor. In my example, I had a year to file my claim before the statue of limitations ran out.

Now anything else that the company wants to enforce on you, like non-disparage clauses or severance bonuses or extra benefits...that's up to you. But what you earned while working is totally yours and you have every right to it without signing a damned thing.
posted by JoeZydeco at 5:06 AM on April 12, 2013

There is no way to know unless you are your friend or his lawyer. Sometimes owed pay is not the only issue in a severance agreement. If for example your friend was stealing or lying on his expenses, they may have been able to propose an agreement whereby they didn't prosecute him in exchange for his signature on the agreement. There is a chance greater than null that you do not have the full story.

If he's wondering, he can see an employment lawyer in the state where this took place.
posted by DarlingBri at 5:07 AM on April 12, 2013 [3 favorites]

DarlingBri: There is no way to know unless you are your friend or his lawyer. Sometimes owed pay is not the only issue in a severance agreement. If for example your friend was stealing or lying on his expenses, they may have been able to propose an agreement whereby they didn't prosecute him in exchange for his signature on the agreement. There is a chance greater than null that you do not have the full story.

This was my thought as well. Even if he wasn't doing anything wrong, perhaps they merely accused him of stealing or other gross negligence and suggested that he would have to defend against the charges in court unless he signed the agreement.
posted by Rock Steady at 5:24 AM on April 12, 2013 [2 favorites]

Anyone who is asked to sign some kind of termination agreement should take it to a lawyer. Chances are it is legit and there is not much that can be done, but it's worth doing. JoeZydeco is correct that it should never be necessary simply to get your final check or continuing benefits such as COBRA coverage, all of which you are entitled to by law.

In terms of recourse, if this is within the statute of limitations for civil cases related to employment (2-3 years usually depending on state), his best bet is to find a lawyer specializing in employment law and go from there.
posted by beagle at 5:26 AM on April 12, 2013

I'd say that without knowing which country he's in (and maybe which state if in the US) as well as things like how long he worked there, any answer you get here is going to be of minimal use.

Ask a lawyer.
posted by sodium lights the horizon at 5:38 AM on April 12, 2013

Response by poster: Because a lot of these are location specific:

He worked in Pennsylvania. He worked there for over a year - I'm thinking maybe 2? He no longer lives in Pennsylvania, though, for whatever complications that may be - certainly inaccessibility to inexpensive Pennsylvania employment lawyers.
posted by corb at 5:46 AM on April 12, 2013

It may have been a "gift" from the employer that they severed him with any kind of pay at all and didn't press charges; you admit you don't know the whole situation and he's not talking about it. There are two flags for me. First is the fact that someone who you say is such a good friend hasn't filled you (or his spouse!) in on the details. Even though he says he can't talk about it, many people break those agreements for spouses or very close friends, it is mostly the public/media that those are meant to keep in the dark. Second is that he has chosen to let this go and hasn't pursued it. There are legal resources out there if a person truly feels they have been unjustly treated by an employer.

I think a possibility you might consider is that he got in trouble for something embarrassing for both him and the company. Both parties came to an agreement as to his resignation and severance (he was paid what he was owed - which is fair), and your friend just wants to leave it behind him. This includes him keeping to that confidentiality agreement as a benefit to him as well as to the company. There are several reasons why someone would be embarrassed to tell friends or their spouse that they were let go - sexual harassment, internet violations, inappropriate behavior, theft. Some of these are also things that would embarrass a company if people found out about them.

An anecdote: Something similar happened to a former acquaintance of mine. At the time he resigned from his job, we were puzzled as to why, but we got the confidentiality story and he would change the subject and we let it go. A few months later we found out (when he finally checked into rehab) that he had showed up drunk for work one day. The company, which was a very public one, wanted to keep it hush hush and save face and so did my acquaintance - who was still in denial about his alcoholism- so they just signed off; he got what was owed and they parted ways, a lawsuit would not have been a benefit to either party. -(I just saw your update on preview - this was in PA FWIW.)

You may not want to think your friend may have done something that warranted this, but it is something to consider. And regardless of what really happened, if he is sticking to the confidentiality agreement, people should respect that.
posted by NoraCharles at 5:53 AM on April 12, 2013 [5 favorites]

There are two flags for me. First is the fact that someone who you say is such a good friend hasn't filled you (or his spouse!) in on the details. Even though he says he can't talk about it, many people break those agreements for spouses or very close friends, it is mostly the public/media that those are meant to keep in the dark. Second is that he has chosen to let this go and hasn't pursued it.

Well... The thing is, you still work there. If you were this person's BFF, their not telling you would be noteworthy.

However, a former employer of mine did a number of absolutely wrong things to me a few years ago. I didn't explain the situation to anyone else who still worked there, but I certainly talked about what really happened to family and relevant friends including one EX-coworker. I most certainly DIDN'T talk about it to anyone who was still working there, nor to anyone else in the same professional realm.

Number one, it's very risky to talk smack about someone professionally. I don't know that the ex-coworker ended up using the information against me, but she was shifty, and if I had my time again I would not have confided in her. And even with people who have nothing to gain, bad things you say are more likely to make you look bad. There would always have been some of them who would have held it against me just for having any story at all to tell.

Number two, I ascertained that I would definitely have had a legal case about some of the actions taken against me (and this is partly why I kept quiet, in case I chose to take legal action later) but knowing this and choosing to pursue it are two different things. I was unemployed and wary of making myself less employable by suing a former employer, not to mention my lack of financial and emotional resources and the need to put my energy into finding another job. Then when my situation improved, I just wanted it all to go away.

If it happened again, I'd be more likely to pursue legal action because I'm in a position of greater strength all around, but sometimes in life, you are just in a one-down position and more vulnerable to getting kicked.
posted by tel3path at 6:18 AM on April 12, 2013

NoraCharles: internet violations

Ah, yes. That reminds me of a promising young man* who was once let go from a Fortune 500 company for browsing porn on his work-issued computer. It wasn't even while he was at work, but the restriction was clear and he was warned about it once. The second time he was terminated. I suspect he didn't want to talk about it to his wife or friends either.

* Not me, really.
posted by Rock Steady at 6:28 AM on April 12, 2013

Sometimes businesses will give higher level employees more than is in their contract in exchange for promising not to sue and not to talk. In this case the duress is two lawyers and your boss saying: your contract says one week of severance for every year of service but we will vest your 401-k and give you an extra month's pay if you sign this document. Offer is good for five minutes and no you cant talk to anyone.

Not telling the wife makes me wonder, however.
posted by shothotbot at 6:46 AM on April 12, 2013

Not telling the wife makes me wonder, however.

OP, has he not told his wife? Or is it that his wife is just not telling you?
posted by tel3path at 6:51 AM on April 12, 2013 [2 favorites]

I know that his wife believes he signed it in some way "under duress"

IAAL, IANYL, TINLA.

Without knowing facts that only your friend would know and share with a lawyer in a privileged communication, we are all guessing. My impression is that this is probably legitimate.

I did want to give a word about duress. Duress doesn't mean "signing a contract while in a bad situation". That happens all the time. Economic pressure is absolutely NOT duress. Duress means something beyond mere illegality and implies that a person has been unlawfully constrained or compelled by another to perform an act under circumstances that prevent the exercise of free will. Something like in the Godfather where the bandleader signs a contract with a gun to his head. Something like "sign this or I will sue you" is not duress.

You want to know if he has recourse. Well, what sort of recourse? Force them to hire him back? Pay him some sum of money? To talk shit about his employer without getting sued? I cannot imagine recourse he could want. I get the impression that this is about your own curiosity and maybe the wife's curiosity. If so, please stop being curious.
posted by Tanizaki at 6:57 AM on April 12, 2013 [3 favorites]

IAAL, but IANYL and TINLA: I also am not licensed to practice in Pennsylvania, and you (or your friend) should seek the advice of a licensed, competent attorney in that jurisdiction if you or they require legal advice.

But if we're just kind of spitballing here, I practiced employment law for a couple of years, and I think a couple of things.

1) Your intuition is right that the employer can't condition the payment of wages already owed upon your friend's signing an additional contract. I don't know about PA law specifically but in every jurisdiction I've looked at the law, payment of wages owed is not consideration for a contract. But having said that, see point 3, below.

2) In some, but not all, states, unused vacation and/or sick time is NOT considered wages owed upon termination, such that the payment of that time could be consideration for a contract. As well, an employer's agreement not to bring a civil lawsuit could be consideration for a contract.

3) I don't wish to second-guess your suspicions, since you know at least some of the situation first-hand, but it's worth mentioning that you are basing a lot of this question on assumptions that you have made. You don't know whether they paid him additional severance. You don't know why he was fired. He knows those things, and he isn't telling them to you. I don't know how big the company is or whether they had their own lawyers involved in the termination, but point 1) above is pretty elementary employment law stuff and would be an obvious and costly mistake for an employment lawyer to make. That doesn't mean everything is above-board, but it might mean there's no fire here. (It could also mean that the lawyer involved drafted a CYA memo telling management that they couldn't do this and they did it anyway.)

4) His recourse is to hire a competent employment lawyer before the statute of limitations runs out. Typically the statute of limitations in the states I've practiced -- again, I don't know PA law so you should confirm this -- is two years for civil matters, but sometimes wage and hours statutes will have a longer statute of limitations for violations. It is at least possible that this is a violation of the wage & hour statute which -- in many states -- contains mandatory statutory damages. He should talk to a lawyer and then, if the lawyer thinks he has a claim or can otherwise get around it, he might also want to talk to the state Dept. of Labor. It's possible he could even run the question by them without violating the terms of the NDA, although I am definitely NOT in a position to recommend that he do that (because, again, not licensed in PA and also I haven't seen the NDA).

But honestly, it kind of sounds like your friend doesn't want to get into this again, for whatever reasons, and from your perspective there's not much you can do to make him want to. Sometimes, people just take their lumps.
posted by gauche at 7:16 AM on April 12, 2013 [1 favorite]

Response by poster: Some more clarifications:

I don't know or talk to his wife - when talking to me, he mentioned "X thinks that it would count as duress." I think from this that he has told her the whole story. We also lost touch for a while - I reached out to him relatively recently because commentary made me suspect he had gotten a rawer deal than I had previously believed.

He talked to me about being really unhappy with being bound in an uncomfortable way by a contract that he's not sure what the precise details are, and not sure what would be violating. I think recourse he would be looking for would be: obtaining a copy of the contract, and having the nondisparagement terms overturned.

I don't think the company hired a good employment lawyer. We're talking about a nonprofit - they generally rely on free or cheap professional labor when they can and most of the lawyers that they rely on regularly are not skilled in employment law.

I think that he would move ahead if he had a good idea of whether or not it would be worth it. I'm not interested in pushing my friend into anything, but I would back him up with testimony and any other way I could assist. .
posted by corb at 7:26 AM on April 12, 2013

Then he needs to get a lawyer, pronto. The good news is he's Plaintiff-side, and there's at least some potential for statutory damages, so he may be able to find somebody willing to do an initial consult for free.

He should bring literally every piece of paper he can lay hands on that might be relevant, and should do so in some semblance of order if possible, but he should call today. Like now.

And he may be able to get a copy of the contract by calling the employer and asking them to email or fax it to him -- saying something like, "I want to make sure I know and understand the terms I'm being bound by here." But he should ask the attorney, ideally while on the phone, whether that's a good idea or whether they want to handle it differently.
posted by gauche at 7:32 AM on April 12, 2013

having the nondisparagement terms overturned.

Based on my experience, good luck. Non-disparagement clauses are perfectly enforceable.
posted by Tanizaki at 7:58 AM on April 12, 2013 [1 favorite]

You can always discuss a contract with your lawyer, and he should talk to one.
posted by theora55 at 9:51 AM on April 12, 2013

If he is actually interested in investigating whether or not he has legal recourse, then the only answer is: He needs to see a lawyer, specifically a Pennsylvania employment lawyer. Full stop.

As you yourself admit, you do not have the full story: all you've got is office gossip and your friend's complaints...... you do not have the facts. You don't know if the company was reducing their total workforce or if he was caught doing something wrong; as others mention, that could include anything from misuse of company computers to watch porn to actual theft; it could also include threats or physical and/or sexual abuse of his coworkers, or drug and/or alcohol abuse that impacted how he did his job. Or it could be plain old-fashioned incompetancy or failure to do his job correctly. Or maybe he falsified something (his education or info about his previous jobs) on his resume. YOU DON'T KNOW.

And since you don't know what actually happened, the best (the only!) thing you can do is, if he wants one, help him find a good lawyer, then leave him to it.
posted by easily confused at 4:08 PM on April 12, 2013