Q: We have an employee who has been having performance problems. He has offered to resign in lieu of being placed on a performance improvement plan, but he wants to continue working for another couple of months because he feels he has a better chance of getting a new job if he’s still employed. Should we allow him to do this?
Can we terminate him if there are problems during his remaining months? Also, we would like to offer him a small severance agreement in exchange for a release of all potential employment law claims. Can we do that and still let him work?
Mastering HR: Firing
A: Your question raises several concerns. Of course, the easiest and cleanest thing to do would be to let him resign and leave your employment immediately or within a two-week period. If you want to let him continue working, however, and obtain a release of potential legal claims from him, then there are several things to consider.
First, if you have him sign a release agreement now, at the time of his resignation, then the period between the date he signs the agreement and his last day of work will not be covered. Thus, although he may release the company from a legal claim involving his employment through the date he resigns, the release won’t cover any future issues.
You could find yourself paying him severance and still having to face a lawsuit if he claims he was treated illegally after the agreement was signed. If, on the other hand, you wait and have him sign an agreement on his last day worked, the release will cover the duration of his employment, but you run the risk that he could change his mind and refuse to sign the waiver at that point.
One way to address this situation is to present him with two different agreements — a release of all claims up to this point and a full and final release at the end of his employment. If you choose to go this route, then you must provide sufficient legal consideration (something of value) for both agreements.
In the first agreement, you should state that he is voluntarily resigning his employment with the company on today’s date and that the company has accepted his resignation. His employment with the company will therefore be terminated effective on a stated date in the future. The consideration for the agreement would be the company’s allowing him to continue working, with full pay and benefits, from the date of his resignation until the future date.
In the second agreement, you should restate that the employee has voluntarily resigned his employment and specify his last day of work, which will be the day he signs the agreement. The consideration for this agreement would be the small severance the company is offering. That way, the employee knows that he has to continue to work and perform his job duties through the agreed-on date to receive his severance.
HR Guide to Employment Law: A practical compliance reference manual covering 14 topics, including discrimination and a section on severance agreements
Of course, you need to make sure the employee doesn’t take advantage of the company during the months he stays on. To that end, your first agreement should state that the company retains the right to terminate him before the agreed-on last day of his employment if he violates the terms of the agreement or any of your policies, rules, or procedures or fails to fulfill the duties and obligations of his job as determined by the company. Moreover, the agreement should provide that if he terminates his employment for any reason during that time, then the company will have no further obligations to him, including payment of the severance.
Remember, too, that if your employee is 40 or older, your release agreements must comply with the mandates of the Older Workers Benefit Protection Act (OWBPA) and the Age Discrimination in Employment Act (ADEA).