By Punam P. Alam, Esq.
On November 10, 2022, the Second Circuit affirmed the District Court for the Southern District Court of New York’s judgment that a severance agreement signed by plaintiff following her return from a medical leave barred plaintiff’s claims for violation of the Family Medical Leave Act (“FMLA”) and New York City Human Rights Law (“NYCHRL”) against her employer.
Plaintiff’s employer, Spotify, was aware of Plaintiff’s mental health issues which included anxiety, depression and attention deficit hyperactive disorder. At a work event, plaintiff had a panic attack causing her to become disoriented and hit her head. According to plaintiff, she was diagnosed with a concussion which impacted her health and mental well-being. Shortly thereafter, plaintiff provided her employer a letter from her physician which stated, among other things, that plaintiff’s prognosis was good and that she could return to her “baseline after another two weeks’ time.” Based on this letter, plaintiff was granted two weeks off from work. Four days after her return to work, plaintiff was presented with a separation agreement providing two months of base salary plus up to two months of COBRA reimbursement in exchange for a general release of claims. She was provided fourteen days to sign the agreement with an additional seven days to revoke the agreement after she signed. Plaintiff signed the agreement and did not revoke it. Two years later, plaintiff filed suit, alleging discrimination and retaliation under the FMLA and NYCHRL.
In enforcing the agreement and dismissing plaintiff’s lawsuit, the District Court identified a number of factors it considers when evaluating whether there was a knowing and voluntary release. The District Court observed that at the Motion to Dismiss stage, the most important factor is the “relative clarity of the agreement” since the “Court will enforce a release of claims at the motion-to-dismiss stage only when its terms are clear and unambiguous.” The District Court enforced the agreement noting that plaintiff had sufficient intelligence and experience to understand the terms of the agreement, that she had sufficient time to consider the agreement and that by signing the agreement she agreed to its benefits. While plaintiff did not draft the agreement or have legal representation, on balance, the factors considered by the Court weighed in favor of enforcing the agreement. The Court also rejected plaintiff’s argument that she did not have the mental capacity to enter into the agreement given her history of mental illness because her physician had specifically stated that she would return to her usual baseline after two weeks’ time and plaintiff signed the agreement after being granted leave for the two weeks.
On appeal, the Second Circuit Court of Appeals affirmed the District Court’s decision and rejected plaintiff’s conclusory assertion that her head injury was still adversely affecting her when she signed the severance agreement.
This case illustrates the importance of drafting a clear and unambiguous severance agreement to ensure that there is a knowing and voluntary waiver or release of potential claims. The case reiterates the strong public policy favoring enforcement of such agreements. The case also demonstrates that employers can swiftly resolve, through a motion to dismiss, potential litigation related to claims that have been waived by a well-drafted severance agreement.
The Southern District Court of New York’s opinion can be found at: https://law.justia.com/cases/federal/district-courts/new-york/nysdce/1:2021cv01653/554913/16/
The Second Circuit Court of Appeals’ opinion can be found at: https://www.leagle.com/decision/infco20221110097
Please contact an NFC team member if you have any questions or seek further assistance.