Releases

Employee releases are most often used when you lack proper documentation to fire, but you want to end an employment relationship and avoid the possibility of a lawsuit. Releases can also be used to offer early retirement to a worker, or when you are seeking to end an employment contract early by buying out the worker. To be effective, the release must be:

in writing
signed by the employee who is waiving the right to sue
a knowing and voluntary waiver
supported by adequate consideration (You must give the employee something of value in exchange for signing the release.). You can negotiate a severance agreement with the employee to provide the necessary consideration.

Here are a few tips to increase the chances that your release will be "iron-clad" if challenged in court:

Allow the employee time to think about signing. The more time an employee has, the less likely that a court will believe that the employee was forced to sign the release.
Encourage the employee to review the document with an attorney before signing it.
Allow the employee a period of several days to change his or her mind after the release is signed.
Allow the employee to negotiate the terms and conditions of the release (for example, let him or her substitute different benefits for the ones you offered). That way, a court will be more likely to believe that the document was signed willingly.
Make sure that the release uses language and a format that the employee understands. The release should specifically refer to employment laws involved in the waiver of rights. Your object is to ensure that the employee can't claim he or she didn't know what the document said. Under no circumstances should you trick the employee or make it seem that he or she has no choice but to sign.

Sample employment termination contract.

If the federal Age Discrimination in Employment Act (ADEA) applies to you (generally, if you have 20 or more employees during 20 or more weeks in the year) and if a worker is more than 40 years old, there are special rules that apply. These rules are designed to make sure that the release was signed "knowingly and voluntarily."

The waiver must be written in language that can be understood by the average worker to which it applies.
The waiver must specifically mention rights and claims under the ADEA.
The waiver may not waive rights or claims that may arise after the date it is signed.
The waiver must be in exchange for valuable consideration in addition to what the individual would already be entitled to receive.
The individual must be advised in writing to consult with an attorney before signing the waiver.
Generally, the individual must be given at least 21 days to consider the agreement, but if the waiver is requested in connection with an exit incentive or other employment termination program offered to a group of employees, each worker must be given at least 45 days to consider the agreement.
The individual must be given at least seven days after signing the waiver to change his or her mind and revoke it, and the waiver may not become effective until the seven-day period has expired.

There are a few other requirements if the waiver is requested as part of any exit incentive or other employment termination program offered to a class of employees. If you are offering such a program to a group of employees, the individuals must be informed in writing about:

whom the program covers
what are the eligibility requirements
what are the time limits for the program
what are the job titles and ages of all individuals eligible or selected for the program
what are the ages of all individuals in the same job classification who aren't selected for the program