What is a Separation and Release Agreement?
Separation and release agreements are contracts that would provide for separation between a practitioner and their agency and the release of claims by the practitioner. The purpose of these agreements is to have the practitioner provide a full range of releases to the hospital or practice. These releases typically include a conference with a representative of the hospital, voluntary relinquishment of staff privileges, confidentiality and non-disclosure of confidential information, and non-disparagement releases. The idea is to take any claims that could be raised in the future off the table. Such a contract can be useful in the context of mutual termination of the relationship. Sometimes a hospital may offer a separation agreement in the course of an investigation of a medical staff member, as a means to resolving the investigation without the need for a record of the findings and/or the reputation of the practitioner being harmed or the hospital/medical staff being liable to the physician . These agreements sometimes take the form of confidential settlements of peer review actions.
The typical scenario we see concerning the use of these agreements is one in which a hospital has begun a peer review or credentialing investigation into a practitioner but wishes to resolve the situation amicably. The practitioner may have some personal issues that make continued practice in the hospital unwise, and the hospital may believe that the best course is to terminate the relationship. The essential idea is to arrive at a resolution without harm to the doctor’s reputation or adverse impact on the hospital’s medical staff files at the state licensure authority; simultaneously, the hospital wishes to rid itself of the practitioner. Less frequently, these agreements may be offered when a physician is leaving a practice group to join a competing group or develop a solo practice.
What are the Main Elements of the Agreement?
Separations and release agreements can have different components, but the typical agreement will usually have certain common elements that are meant to act as consideration for the employee’s waiver and release. The most frequent elements of a separation and release agreement include: (1) severance, (2) continuation of certain benefits, (3) continuing obligations of confidentiality and non-disparagement, and (4) return of company property.
Severance represents compensation paid to the employee beyond the value of wages already earned. Severance can be based on a ratio of weeks pay per year worked, the number of weeks severance offered is generally up to the employer, but the prevailing rule of thumb in the industry is to offer one week of pay per year of employment. However, the employer should account for the premium pay for employees who will be losing bonus and incentive pay as part of their separation. For example, an employer can account for this incentive pay by offering a "true up" bonus in connection with its severance pay.
Benefits continuation is significant to an employee because continued benefits signify that the employer still acknowledges the employment relationship for the purpose of obtaining health benefits. The employee will still need to pay premiums, but not at the full premium cost as they would if they were responsible for their own premiums.
The non-disparagement clause is important to an employer because that clause ensures that the employee will not disparage the former employer. At times, the employer may also want to have a mutual non-disparagement clause, so that both parties are bound to not disparage the other.
The Advantages and Disadvantages of Signing the Agreement
Advantages. If you are seriously considering signing a separation and release agreement with your husband, what are the possible advantages for you? An obvious one is the likely financial benefits, as your husband is slicing through all the legal arguments and ideas in your case and proposing to settle your case with money to you. People sell on court stocks to wrap up a lawsuit and move on. Your husband’s proposal and decision to sign an agreement is his way of telling you that he wants to move forward in your case, not keep it on the slow track.
Disadvantages. Just because the husband proposes a separation agreement, doesn’t mean you have to sign it. Consider the disadvantages. In the extreme, the husband proposes a deal to you, you think it is unfair, you sign it anyway to get the money he is offering, and then, your husband does not live up to his end of the bargain. That happens more often than you think, particularly when he sells the house to pay you. Then, he doesn’t give you the checks or even the closing statements. Sometimes, ex-husbands hold back and prevent you from getting your share of the equity in the house, arguing that there is not enough money to pay you. Meanwhile, the ex-husband lives in the same house, for months after the closing, or refuses to move out. And the whole time, you are without legal counsel or a careful review of the separation agreement. If all of this sounds impossible or implausible, you do not know many divorced people in the real world. You may think divorce lawyers create drama, when the truth is many divorced people create drama simply by living out their emotional and financial difficulties.
Which brings us to another danger in signing an agreement your husband proposes, where you do not have your own family law lawyer and the idea of seriously negotiating a deal seems too painful. What you would be doing, is giving away your leverage in a negotiation, because you will be helping draw the line for the agreement. He will tend to want to make the issue black and white, set your agreement on terms alone. By signing, you give up trying to negotiate terms on the basis that your spouse is correct about the finances. A little leverage goes a long way in negotiation and probably a much long way in negotiation in family law. You give up your leverage when you sign the agreement.
Is that really a good idea, to sign the agreement first, without having your lawyer review it? Is it also a good idea to forget about the parts that are "okay" and sign for the money, knowing you will argue later about those areas that you skipped over? What happens when your husband thinks you are okay with the agreement and finds out you are not okay? Handing over the pen could come back to bite you.
Legal Hazards to Look Out For
It is essential to review what rights or claims may be waived if you sign the Separation and Release Agreement or Release of Claims. Like any contract, you will be giving up certain rights, claims or amounts against the Company, but you should determine if you are also giving up any legal rights. At minimum, you will be giving up your right to sue the Company or take any action against the Company in exchange for payment under the agreement. The terms and language should be defined in a manner consistent with the jurisdiction and industry , but for the most part the terms will be defined broadly so as to include any claims, suits, complaints, actions, causes of action, charges, grievances, arbitrations, investigations, obligations, promises, contributions, liabilities, expenses, injuries, losses, damages, requests or counterclaims which relate to or arise out of your employment with the company.
The foregoing paragraphs are full of legal jargon and while it is advisable to have an attorney review the agreement before signing, understanding what you are agreeing to may assist you in determining whether or not you should sign the agreement.
Deciding What is Best for You
Your personal situation should provide most, if not all, of what you need to decide whether or not to sign the separation and release agreement. Are you satisfied with your severance? If you are okay with it now, will you be okay with it two or three years down the road? Will you be able to achieve your personal goals without it? We still have clients who once worked for global giants, making salaries in the six figures, and now find themselves under-employed. The gap between the standard of living they enjoyed and that to which they’ve become accustomed continues to widen. It would have been a mistake to sign an agreement that would have permanently tied their hands if they could have used it in the negotiation over their employment agreements. Being very specific is always better than being general when it comes to setting and understanding goals and assessing the benefits of accepting or declining the separation package.
Things You Must do Before You Sign
In the best of times, it is never a great idea to just hand someone a muddy document filled with legalese and told to "sign here." However, many times separation and release agreements are presented to employees in this manner.
While such agreements are often pretty good for the employee in some regard (i.e., nice severance or continuation of salary), there are other issues that need to be addressed before you sign on the dotted line. Too many people take the easy way out and turf these documents to an attorney instead of reviewing the document yourself and being able to point out issues.
As always, we start with the appropriate procedure. This is something that I have said many times in many different forums, but it is very important that you make your position clear on issues that are important to you. In order to do this, you need to review the document yourself first so you have a baseline to start from when you then consult with an attorney. When you think about what an issue is, you should also have an idea on how to fix it in the document. When you can articulate a position that way, it makes it easier for you to work with a lawyer.
Once you have had the chance to review the agreement carefully, you then consult with a lawyer about the document. Doing this step right can save you time and money and help to preserve the rights that you have against your employer. I have said many times that there is no reason to pay attorneys hourly rates to negotiate a simple non-compete clause or other similar issue, but when there are real opportunities to negotiate away bad clauses and conceal information, it is worthwhile to have an experienced advocate on your side.
Once you engage with a lawyer and provide the necessary information to him or her , they can try to make changes to the document. It is at this point that the process can rage out of control or be efficient and amicable. Many employers I have dealt with have been open and transparent about a document and have been willing to make changes. Other employers have been less than helpful and only after you bring in a litigator do they realize that it may be a bad idea to use nondisparagement clauses to conceal information about illegal activity.
If the client does not have any issues with the document after the negotiations are done, they can then sign it. Otherwise, if they still have issues, a better and more streamlined option is to not sign the document, but send a letter out outlining a termination with language that does not constitute accepting the separation and release. In that letter, you can also outline what you see as valid issues with the agreement and ask the employer to work to resolve those issues. This keeps the process of negotiation open and prevents any premature acceptance of a bad document.
Too many times I have dealt with situations that could have been avoided with a simple separation and release agreement review. And even worse, I have many times had to deal with situations that could have been resolved without the need for litigation. Too many releases are bloated beyond belief with extra clauses that would not stand up to even modest scrutiny in front of a judge, and I have seen too many employers believe their own hype about the validity of many of these clauses, instead of realizing that it is just a way to avoid exposure to liability for wrongful termination, FMLA interference and retaliation, or discrimination.
Having the appropriate procedure in place can help mitigate this situation.