Wait a Second… Didn’t the Employee Sign a Release of This Employment Discrimination Claim?!? Perspective of Texas Outside Corporate Counsel

In Texas, it is seemingly very common for employers, when terminating an employee, to pay a sum of money (usually termed “severance”) in exchange for the former employee’s release of any legal claim related to the employment relationship. Often times the terminated employee is satisfied with the “severance” payment and everyone goes on with their lives.

However, there are other times when the terminated employee is not satisfied with the way things ended with its former employer. Maybe the “severance” was not enough, or maybe the employee felt that he was terminated for an unlawful reason. This is when the employer really needs that release it paid for to be enforceable.

The problem is that many of them are not. Employment law can be very technical and as a result innocent mistakes are frequently made. Does the release provide the employee with an opportunity to review the terms with independent counsel? Does it use clear and specific language to address the type of claims being waived? Does it require the employee to acknowledge that he is receiving fair compensation in return for his signature on the release?

If the answer is no to any of these questions, there is a possibility that the employee will be permitted to pursue legal action despite that fact that he signed a release. The good news is that with the help of an experienced outside counsel employment lawyer problems in release documents can be easily corrected.

From an employer’s perspective in Texas, securing a robust release of employment discrimination claims is a vital risk-management tool when terminating an employee or settling disputes. Because Texas is an at-will employment state, employers can fire employees for many reasons, but they remain vulnerable to discrimination charges under the Texas Labor Code Chapter 21, which prohibits discrimination based on race, color, religion, sex, national origin, age, or disability. A well-drafted release agreement, usually provided in exchange for severance pay or other consideration beyond what the employee is already owed, acts as a contractual waiver of the employee’s right to sue, provided it is signed voluntarily and knowingly. Without this release, employers face significant financial exposure to lawsuits, attorney fees, and administrative headaches at the Texas Workforce Commission (TWC) or EEOC.

For a release to be enforceable under Texas law, it must be drafted in plain language, conspicuously identify the claims being released, and be supported by valid consideration. As an employer’s attorney, I would try to ensure the agreement explicitly references the specific types of claims, including Title VII and Texas Labor Code claims, and provides "new" money or benefits, not just earned vacation or salary, to make the release valid. Furthermore, for employees aged 40 or older, the Older Workers Benefit Protection Act (OWBPA) requires specific procedural safeguards, such as a 21-day consideration period, a 7-day revocation period, and an explicit recommendation to consult with an attorney before signing. Skipping these requirements, particularly for older workers, renders the waiver ineffective against age discrimination charges.

Always, the goal of a release agreement is to achieve finality, ensuring that once an employee accepts a separation package, they cannot later file a charge with the TWC or EEOC or initiate a lawsuit. A strong release should cover all potential claims, including wrongful termination, retaliation, and harassment. While it is important to include comprehensive language, I advise employers that release agreements cannot waive prospective claims—actions that occur after the date the agreement is signed—or claims that are not legally waivable. By following these legal requirements, employers can, in most cases, definitively close the book on potential employment disputes and move forward without the threat of unexpected litigation.

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