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Severance Agreement Cannot Waive USERRA Rights

The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) protects members of the military from adverse employment action based on their military status or military service. It also protects a service member’s job in the event they are called into service. One key provision of USERRA is that an employer may not limit, by contract or otherwise, any rights granted under that statute.

In Perez v. Uline, Inc., the California Court of Appeals had to decide whether a severance agreement and release could waive an employee’s right to sue under USERRA. Perez was given one and one-half page release and severance agreement that released a nonexclusive laundry list of state and federal laws and “any other federal or state law, statute, decision, order, policy or regulation establishing or relating to claims or rights of employees …, and any and all claims in tort or contract, based upon public policy, and any and all claims alleging …defamation, … or wrongful discharge.”

Perez was advised to, but chose not to, consult with a lawyer before signing the agreement. Perez, who was college educated, read the agreement several times and unsuccessfully attempted to renegotiate its terms. On the last day for acceptance, he signed the agreement to assure he would receive 6 weeks severance pay. He later sued his employer alleging several different theories of liability. One claim was that his termination was due to his military service. The employer defended the claim arguing the release extinguished all of Perez’s claims including his USERRA claim. The California Court of Appeals reversed the trial court and held that “a contract may not limit the protections of USERRA, which prohibits termination of employment based on membership in the military or performance of military service.” As a result of the Court of Appeals decision, Perez was entitled to have a court decide whether his termination was indeed based on his military status.

The Bottom Line:

There are distinct benefits to be derived from the practice of using a release and severance agreement when an employment relationship comes to an end. For the employer, a release of claims assures there are no loose ends that may surface months or years after an employee departs. In addition, the payment of a severance benefit is less expensive than defending employment litigation. For the employee, a severance package makes their job transition easier and can address issues such as letters of reference or what information will be conveyed to prospective employers. USERRA is an area where Congress chose to carve out an exception to the ability to contractually release a claim. This case appears to be one of the first to address this particular issue in the context of USERRA. Employers have found in several cases that contractual limitations on USERRA rights, such as arbitration clauses, are not enforceable so this case is no great surprise. It does highlight that employers need to exercise care when drafting release and severance agreements. With the myriad of laws that address workplace issues, care must be given when drafting these agreements.

Nothing in this blog should be considered legal advice or to form an attorney client relationship. The information provided is general in nature. Nothing can substitute for a consultation with a legal professional who can address your particular legal concern.

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