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Severance Agreements and Being "Paid for Silence"

Posted by Scott M. Peterson | Mar 03, 2017 | 0 Comments

A recent article in the Albany Times Union highlighted a very common but somewhat unknown employment occurrence - the severance agreement with confidentiality provision.  

The article was about four former employees of SUNY Polytechnic - the well known Albany school that for years was led by Alain Kaloyeros.  In case you don't remember Kaloyeros, he was the flamboyant scientist at the helm of SUNY Poly who was arrested in September 2016 on State and Federal bid rigging charges.  The four employees - a former spokesman and top ranking administrators at SUNY Poly - were all apparently asked to leave the school within weeks of the arrest of Kaloyeros.  They are not accused of wrongdoing.

In conjunction with their departures, the Times Union reports, the employees received a total of $115,000 in lump sum payments.  They also appear to have signed separation agreements in which, among other things, they agreed not to sue the school and to remain silent about the circumstances of their departures.  

We understand why this story was newsworthy - when four high ranking employees are let go in the face of a criminal prosecution against the person at the top it certainly raises questions; even more so when they receive payouts on their departure. 

However, we know from experience that the type of agreement being referenced in the article - likely a standard severance or separation agreement - is not at all uncommon when an employee is terminated.

The Choices Facing an Employer

When an employer fires an employee it has two choices - it can give the employee nothing and take the chance that the employee files a lawsuit for discrimination (based upon age, disability, race, sex, sexual orientation, medical leave, pregnancy, military status or something else).  Even where the employer thinks it has done the right thing, it is often the case that it has not.  

The second choice is to provide the employee with a severance payment and have them sign a separation agreement.  These agreements typically range from one to several pages, and while they can include all sorts of terms, the two most significant are the release and the confidentiality agreement.

By signing an agreement with a release an employee is promising the employer that he or she will not file any lawsuit against the employer in the future - for anything that happened up until the date of the release (you generally cannot waive future, unknown claims).  This includes claims for discrimination, breach of contract, tort or otherwise.  

The confidentiality section likewise includes a promise by the employee that he or she will not, unless ordered by a court, disclose the terms of the agreement (including how much they were paid) or discuss the circumstances of their departure.  Many agreements have sections that lay out what happens if the employee violates this section - which can include repayment of the severance amount.

By paying a severance an employer is effectively buying its peace of mind.  It is receiving, in exchange for money, a promise that the employee will not file a suit and will remain quiet, so that the employer can (in most cases) move on.

The problem for employers comes when they are public entities, and are therefore subject to freedom of information laws.  In those cases they never know when a news reporter or concerned citizen will come knocking with a FOIL request for a copy of the agreement - which is what happened to SUNY Poly.

Agreements with releases and confidentiality provisions are very common in the world of employment law and discrimination, but when they are used under circumstances that raise concerns, in a public entity, they can still become a problem.

If you have questions about employment discrimination or a severance agreement contact us today.  Or for a quick case evaluation fill out our confidential employment questionnaire.  

About the Author

Scott M. Peterson

Scott M. Peterson is the founding partner of D'Orazio Peterson, having left a partnership at a large regional law firm to limit his practice and focus on helping people protect their families.


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