Fraudulently Induced Release of Claims Not Knowing or Voluntary

In case you were wondering, employers should not misrepresent the circumstances of an employee’s termination when obtaining a release of claims. In a recent case in Colorado, an employer told an employee who was out on medical leave and completely incapacitated, that it was having financial difficulties, needed to cut jobs, that her job was being eliminated, and that her layoff was not performance based. The employer mailed the employee information about severance and then sent the employee’s supervisor to her house to pick up a signed release. The employee later discovered that the employer was advertising her position and that, contrary to the employer’s claim of financial distress to support a reduction-in-force, her position had not been eliminated – a younger employee had been hired to do her job.

The employee sued for age discrimination and the employer sought to use the release to dismiss the case. The court found, however, that the employee alleged enough facts to show that the release was based on fraud, i.e., the employer’s lies about its financial situation and claimed need to reduce staffing, and thus invalid because it was not knowing or voluntary.

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