"Waiver in Severance Agreement Held Ineffective to Release Claim of Discrimination by Military Member Returning to Civilian Job"


February 28, 2008
With our military now having been involved in Iraq for the last five years and in Afghanistan for six, the issuance of a recent California Court of Appeal decision on the rights of members of the armed forces to return to their regular jobs suggests that employers should review their policies and practices to ensure they are complying with obligations to employees who are also of members of the military.

In Perez v. Uline, decided this past December 6, the California Court of Appeal in Santa Ana held that a privately negotiated settlement agreement whereby an employee who was also in the military waived his rights to return to work after a military leave was void based on federal statute.

Perez was a Captain in the United States Marine Corps reserves and was also an employee of Uline. Perez took a leave of absence to serve a tour of duty with the reserves. On his return Uline told him his services were no longer needed. Uline presented him with a document entitled "severance agreement and release" pursuant to which they agreed to give him six weeks salary in exchange for Perez releasing Uline from all claims. The release purported to constitute a waiver of named and unnamed claims under federal and state law as well as in tort and contract. Perez signed the agreement and was paid the six weeks salary. Subsequently, he sued Uline, claiming that he had been wrongfully terminated. He also alleged that his termination was in violation of federal and state statutes prohibiting termination of members of the military.

The trial court held that the severance agreement constitute a waiver of any claim Perez might have for discrimination based on his military status. The Court of Appeal reversed, finding that federal law prohibited any contractual agreement by which an employee gave up his statutory rights. "The statute plainly states that a contract may not limit protections" of federal law "which prohibits termination of employment based on membership in the military or performance of military service."

In 1974, near the time that the Vietnamese conflict ended, Congress enacted the Uniformed Service Employment and Reemployment Rights Act (USERRA).1 One of the goals of USERRA was to prohibit discrimination based upon service in the military. One of the rights guaranteed by USERRA is the right of those in military service to return to their civilian jobs when their service ends as long as they give their employer adequate notice of their intent to return.

In Perez v. Uline, the plaintiff had a statutory right to return to his job. Uline took the position that Perez’ services were "no longer needed" and offered him a severance package in return for his signature on a general release. Perez signed the agreement and took the money. He later sued, contending among other things that his termination was in violation of state and federal law, including USERRA.

The Court of Appeal did not decide whether Uline had a legitimate factual basis to terminate Perez’ employment i.e. whether his services were truly "no longer needed.' However, the Court did hold that the settlement agreement negotiated between the parties could not legally constitute a waiver of Perez’ rights under USERRA because of the language reading: "This chapter supersedes any State law. . . contract, agreement. . .or other matter that reduces, limits, or eliminates in any manner any right or benefit provided by this chapter. . . ." The Court construed this provision of USERRA as plainly stating "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. . . .we decide this without making any determination as to whether plaintiff was actually terminated because of his military service."

The provisions of USERRA are quite broad and significantly protect the rights of those who have served in our military. USERRA supersedes any state law or private contractor agreement that reduces, limits or eliminates any right or benefit provided by USERRA. USERRA guarantees a member of the military the right to return to his or her job as long as they give adequate notice to their employer of their intent to return to work. The period of notice which is required depends upon the length of time the employee was on military leave.

California also has protective provisions in the Military and Veterans Code (beginning at section 389). The State provisions also protect the employee from discrimination because of military service and guarantee an employee a leave of absence to perform military orders.

The significance of this case is that, notwithstanding the amount of money the employer might have paid, the employee was legally precluded from waiving his claim that the company discriminated against him because of his military service. One is left to question whether an employer and employee can ever settle a claim alleging discrimination in violation of USERRA. Whether Congress actually intended that a discrimination claim under USERRA could never be settled without Court supervision is unknown. We will be watching the subsequent history of this case to determine whether it is reconsidered by the Court of Appeal or reviewed by the state Supreme Court.

As more and more members of the military return from active service and attempt to reenter their civilian lives, all employers should review their current policies and practices to ensure that they are in compliance both with USERRA, the federal law, and the Military and Veterans Code, the California law.

This article was written by Jeffrey Freedman, an attorney with the labor and employment law firm of Liebert Cassidy Whitmore (LCW). Mr. Freedman is a Partner in the Los Angeles office and can be reached at (310) 981-2000 or at jfreedman@lcwlegal.com. For more information regarding the information above or our firm please visit our website at www.lcwlegal.com, or contact one of our offices below.

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