Tuesday, February 17, 2009

Do you know? Agreements cannot waive future claims

Do you know? One of the mistakes that I see made over and over again in agreements I review is waivers of future claims. Take, for example, Hamilton v. General Electric Co. (6th Cir. 2/12/09), in which an employee had signed a “last chance agreement.” In exchange for reinstatement following an earlier termination, the employee agreed that he would not file legal action over any future termination. The 6th Circuit found that promise unenforceable because it amounted to a release of future claims.

For a waiver and release of claims to be valid, it only can release claims based on past conduct, and not future claims: As explained by the 6th Circuit in Adams v. Philip Morris, Inc.:

An employer cannot purchase a license to discriminate. An employment agreement that attempts to settle prospective claims of discrimination for job applicants or current employees may violate public policy … unless there were continuing or future effects of past discrimination, or unless the parties contemplated an unequivocal, complete and final dissolution.

If you are using any agreements for employees (such as severance agreements in connection with layoffs), be careful to ensure that they are not seeking to waiver any claims based on future conduct.