The “Back-Stop” Release
There are times when a departing employee who is getting a severance package in exchange for a release isn’t departing immediately. If the employee signs the release and then continues to work for a period before departure, what is the legal effect of the release?
Under Minnesota law (and general principles of common law) an employee cannot release a future claim. So if the employee signs a release effective day one, but works through day twenty-one, the release is effective only for claims that arose before day one. That is, the employer still has potential exposure for claims that could arise between days one to twenty-one even though it paid severance for a release. And since such a stay-over can have its stresses and employees can get “settlement remorse”, having “tail exposure” may be a real concern for the employer.
A common solution is the “back-stop” release; that is, a second release required by the separation agreement signed upon the day of departure that covers the “tail” period. The back-stop is cumbersome and somewhat duplicative, but it is the safest course – especially when there is a realistic possibility of a claim arising during the “tail” period.
Takeaway: If an employer is looking to keep a departing employee for a period of time after a separation agreement and release is signed, consult legal counsel to discuss a “back-stop” second release as part of the separation package. Otherwise, the employer may not be getting what it thought it bargained for – a complete and comprehensive release.