It recently came to light that two Merrill Lynch executives were fired and paid approximately $11 million in exchange for signing a non-compete and release agreements. Some were outraged about the payment considering the current plight of BofA and Merrill. But for most employers, a severance payment in exchange for a release makes good sense.
In many situations it makes sense for an employer to seek a release from an employee at the time that their employment term ends. The conclusion of the employment relationship presents the opportunity for the employee to obtain a release in exchange for some type of severance payment. There is no hard and fast rule as to what that amount should be. Severance is not required in the state of Texas.
Under the Texas Payday Act and other statutes, the employer must pay the employee whatever he or she is owed at the time of termination. Put another way, the employee cannot be forced to sign a release in exchange for receiving money that they are already owed.
The release should be designed to have the employee give up any potential claims that he or she may have against the employer. Please consult with a lawyer to ensure that the release is drafted broadly enough to cover the claims and that any statutory requirements are met for the release. The last thing you want to do is prepare a release that is ineffective.
