General Release = Major Issue

| Jason M. Knott

"General Release = Major Problem"

For a high-level executive leaving a company under less-than-ideal conditions, it’s as common as handing in keys to security and shutting down the computer for the last time.  In exchange for a severance payment, the executive is asked to sign the typical general release: “I hereby release my employer from any claims, liabilities, demands, or causes of action . . .”

Unsurprisingly, once an employee signs a general release, if he later sues, he is likely to face a quick motion to dismiss.  

David Lat at Above the Law recently covered one such case: that of Gregory Berry, ex-Kasowitz Benson first-year associate, who sought $77 million from his former firm but couldn’t overcome his signature on a release.

And in another recent case, the California Court of Appeal held that a release prevented Alex Baah, former executive at the Pacific Bell Telephone Company, from reaching out and touching his former employer.  Baah argued that the release he signed was unenforceable because he couldn’t get meaningful help in understanding it from his former colleagues or the two outside lawyers he consulted.  The Court of Appeal disagreed, holding that the language of the agreement was clear enough for Baah and his lawyers to understand.

The headline from the Baah opinion, for those who are either handing out or considering whether to sign a general release: “[E]mployee severance agreements containing a clear and explicit release of claims are, in the absence of a specific statute, generally enforceable.”  And while the court said “generally,” it probably could have said “just about always.”