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Call lawyer when changes mean employees must sign releases

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in Compensation and Benefits,Employee Benefits Program,Firing,Human Resources

Sometimes, it pays to take the time and spend the money to have legal experts carefully review your proposed actions. That’s especially true if your company is changing the way it does business in a fundamental way and wants employees to sign off on changes that dramatically affect how they are paid or whether they remain employees.

Here’s why: Getting it wrong can mean years of litigation, negating any potential savings.

Recent case: Back in 2000, Allstate Insurance began a transition from an employee-agent program to an independent-contractor program. The move was partly designed to save money on things like employee benefits.

Employee agents were given several options, including becoming independent contractors or leaving entirely and receiving a full year’s salary as severance pay. Each option required the agents to sign a release of all their rights to sue. Those who didn’t sign would instead be terminated and receive just 13 weeks of severance pay.

Several agents signed and then sued, alleging that they had been misled and that the releases were invalid. The court certified the case as a class action. It then dismissed the case, and the former agents appealed.

Now the 3rd Circuit Court of Appeals has sent the case back to the trial court with instructions to take a close look at whether the agents were coerced or whether there is another reason the releases might not be binding. (EEOC v. Allstate, No. 07-4460, 3rd Cir., 2009)

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