What To Pay Attention to When Drafting a Release of Claims Agreement

Standardized Legal Documents What To Pay Attention to When Drafting a Release of Claims Agreement

What Is a Release of Claims Agreement?

If you don’t write, review, or sign legal documents often, you may be unfamiliar with a release of claims agreement. It’s a vital agreement in certain workplace environments.

This article will tell you:

A Release of Claims Agreement Explained

A release of claims agreement goes by many names:

  • General release
  • Release
  • Release of all claims
  • General release and separation agreement
  • Mutual release and settlement agreement
  • General release from contract liability

This document is a legally binding contract that one or more parties sign as a promise they won’t file any claims against another party.

The party that agrees to waive their right to sue another party is called the releasor, while the party being released from any and all liability is the releasee.

In exchange for signing a release of claims, the releasor gets something of value they would not have had otherwise—consideration or a severance package.

When To Use a Release of Claims Agreement

The most common situation that calls for a release of claims agreement is the termination of an employment contract between an employer and employee. 

Employers offer a release of claims to their employees because they want to avoid legal disputes. An employee may file a lawsuit against their employer for early termination or a deed committed while employed.

A release of claims is also used in a variety of other situations. For example, when a car accident occurs, the party that caused the incident may offer a general release to an injured party. The injured party can’t sue the injurer if they agree to the general release’s terms and conditions and sign the contract.

You may also need a release of claims in case of damage:

  • To real property
  • Made by a pet, a child, or a minor
  • To a vehicle or other personal property

The U.S. Equal Employment Opportunity Commission (EEOC) and Release of Claims Agreements

The U.S. Equal Employment Opportunity Commission (EEOC) is an organization that ensures employers don’t discriminate against their employees based on age, gender, disability, ethnicity, and sexual orientation.

The EEOC puts limitations on a release of claims agreements that employers must watch out for. Even when an employee signs a release, they may still file a complaint against the employer with the EEOC. The organization then has the right to begin an investigation to determine whether the employer discriminated against the employee.

Common Terms and Conditions in a Release of Claims Agreement

Here are some of the critical sections in a release of claims agreement:

  1. Identification of the parties—full names and addresses of both parties
  2. Release of claims—language describing that the releasor can’t file any claims against the releasee
  3. Consideration—description of the severance benefit the releasor will get upon signing the agreement
  4. Right to revoke—the number of days the releasor has to change their mind after signing
  5. Non-disparagement—a clause that dictates the parties cannot slander each other
  6. Signatures—signatures of both parties of the agreement 

In case of employment termination, your release of claims agreement needs to include these additional sections:

  • Employment termination—statement that the releasor is no longer an employee of the releasee
  • EEOC claims—statement that the employee may file a complaint with the EEOC

Tips for Offering and Signing a Release of Claims Agreement

Whether you are waiving your right to sue another party or are offering a release of claims to another party, you should do so with caution.

Check out the table below for tips on signing a release of claims:

Tips for the ReleasorTips for the Releasee
  • Take the time to consider your decision instead of signing a release in haste at an employment termination meeting
  • Review the terms and conditions in the agreement carefully
  • Seek legal counsel if you’re not familiar with specific terms
  • Remember that you have time to revoke your decision after signing—the deadline is seven days in most jurisdictions
  • Don’t pressure an employee into signing a release
  • Inform your employee that they can take time to consider the release—usually a little over a month
  • Negotiate a severance package the employee will be satisfied with
  • Make sure that your release is compliant with the governing law (for example, there are different release forms you may have to use for employees aged 40+)

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