Severance Agreement Releasing Employer And Employees From Claims Is Enforceable

The Michigan Court of Appeals has affirmed that a severance agreement signed by a terminating employee that expressly released both the employer and its employees precluded future claims against the terminated employee's former co-workers.

In Collucci v Eklund (April 28, 2000), an employee was accused by a co-worker of sexual harassment. The company investigated and concluded that while the employee's conduct did not constitute illegal harassment, it was "unprofessional" and demonstrated "poor judgment." Within two months, the employee was selected for termination as part of a reduction-in-force because of this incident and other performance issues. He was offered an enhanced severance package in exchange for a release, which he accepted. The severance agreement expressly released the company and its employees from any and all claims arising out of the employee's employment or termination. When the severance payments ended, the employee sued his former co-worker who had accused him of harassment, claiming he had been defamed.

The co-worker sought dismissal of the case, arguing the defamation claim was barred by the severance agreement. The employee countered that the severance agreement did not bar his claim because the co-worker had not been a party to the agreement and had not provided any of the consideration paid to him. The court dismissed the case and ruled that the severance agreement expressly released all claims against the employer and its employees.