Legal Tools all Employers Should Consider: Importance of Employment Releases and Arbitration Clauses

Quite some time ago, the young attorney mentioned to his mentor that “the laws must have been so much easier on business when you were young.” Replied his mentor, “sure, that’s what I said to my mentor!

For employers, the law keeps moving away from the employer to the employee. However, there are still a few tools left that all employers should consider. These tools are the employment release forms and carefully-drawn employment handbooks containing mandatory arbitration clauses.

Employment Releases. Releases are not unusual and may be used in the employment situation. Where either the employer is fearful of past transgressions or the “unknown”, the employer should ask employees to execute mutual releases; we recommend this once per year. Most states statutes of limitations are 3 years; this can save considerable dollars but it vacates claims preceding the date the release is signed. The release can also absolve the employer against punitive damages and an award of the employee’s legal fees. Our experience is that few employers consider that an employee’s legal fees and punitive damages must be considered as potential awards no matter how small the claim. (*See note below*). Workplace Note: Most courts will require valid consideration be paid for the release. Therefore, we suggest in lieu of giving employee bonuses, you ask employees to sign the release form and pay them the for it. Discontinue the employee bonus and but do not require signing the release form as a condition of employment. A good release form accompanied by payment can release the employer for past year’s known and unknown issues.

*Note*: Courts in wage payment and discrimination cases award legal fees of up to $865.00 per billable hour against the employer no matter how small the employee’s claim. Employers will have to budget up to $75,000.00 per case for defense of an employment law action. See Salazar v. District of Columbia and Laffey v. Northwest Airlines. The Laffey Matrix may be found at

Employment Handbooks and Arbitration Clauses. Drafting a clear employment handbook is good business and makes employees feel more secure in their jobs because the employees can then identify what is generally required of them in writing. A carefully-written handbook with a mandatory arbitration clause is typically enforceable and can save the employer tens of thousands of dollars in court costs. In addition, arbitration ensures that no jury (typically sympathetic to the employee) will hear the case and an arbitrator who can be an expert in the employment field will be the judge rather than a judge.

Good business means good planning.