Can an employer reach agreement with a worker on the termination of employment in which the employee validly waives his rights in return for a payment? If yes, describe any limitations that apply.

Employment & Labour Law (3rd edition)

Argentina Small Flag Argentina

Waivers and releases upon termination would only be valid and enforceable if

  • signed before the Ministry of Labour,
  • the employee has legal counsel,
  • whatever is waived and released is clearly identified in the agreement,
  • the compensation is clearly identified and paid. General releases could be challenged successfully.

China Small Flag China

In China, the employer can reach an agreement with a worker on the termination of employment where the employee waives his rights unless the agreement falls into the scenarios which render the agreement invalid pursuant to the Contract Law of the PRC, such as damaging the public interests, violating the mandatory provisions, etc. Accordingly, this agreement cannot entirely avoid the risk of litigation brought by the employee. The employee retains the right to sue and the judge will consider all the relevant rights of employee to determine whether this agreement meets the abovementioned exceptions or whether it is obviously unjust to the employee or not.

Ecuador Small Flag Ecuador

No, it is not possible. Article 326 numeral 2 of the Ecuadorian Constitution establishes that labor rights are irrevocable and that any stipulation to the contrary shall be null and void. This means that even if the worker signs an agreement that implicitly or explicitly involves a waiver of rights, he may claim recognition of his/her rights before the judge, who shall grant them.

It should be noted that the Ecuadorian Constitution admits the transaction in labor matters with the exception to waiver labor rights. Which means that if the worker agrees to receive (not waive) an equivalent benefit in exchange for a contractual or law right, such an agreement would be valid.

France Small Flag France

A mutually agreed termination (“rupture conventionnelle”) permits to end the contract while avoiding any legal challenge about the justification of termination (unless the employer fraudulently resorts to said termination to avoid a legally mandatory procedure such as redundancy). Yet such termination does not bar the employee from claiming amounts pertaining not to the termination, but to the employment relationship itself (salary or overtime back pay, damages for harassment, etc.).

As an alternative, the employee and the employer may enter into a settlement agreement subsequently to dismissal, in which case the employee may validly waive his rights to sue the employer. Said settlement implies the payment of a settlement indemnity.

Germany Small Flag Germany

Yes, this is possible. However, the employee may have to use some caution as a termination agreement might limit the employee’s rights to unemployment benefits.

Chile Small Flag Chile

Yes. Mutual agreement termination is recognized as a valid termination ground. The payment to the employee shall be agreed in order he/she could validly waived his/her rights against the employer. This termination agreement and labour release must be in writing and shall be signed before a Notary Public.

Indonesia Small Flag Indonesia

Yes, such an arrangement is possible. Where an employer and employee agree to mutually terminate the employment relationship, the termination payment must not be less than the amount prescribed under the Labour Law (i.e., the employer may provide more but not less than the amount stated in the Labour Law). Kindly be advised that such arrangement must be documented in a settlement agreement, which must be registered at the relevant industrial relations court.

Italy Small Flag Italy

Under Italian law, settlement agreements whereby employees waive any claims arising from the employment relationship and its termination may be lawfully executed.

However, whenever these settlement agreements include employees’ waivers of rights established by mandatory provisions of law or under collective bargaining agreements (as the right to challenge the dismissal is), such waivers are invalid unless the settlement agreement is executed before certain bodies (namely, the trade unions, labour offices or labour courts).

If the parties fail to execute the agreement before the above bodies, the waiver is to be considered as being null and void and the employee may challenge it within a 6-month term running as from the date of termination of the employment relationship or the date on which the agreement is executed, whichever occurs later.

Malaysia Small Flag Malaysia

Yes, the cessation of employment can be brought about by mutual agreement of parties. Voluntariness of the employee is the key - the employee cannot be compelled to enter into such an agreement. The terms agreed are commonly encapsulated in a mutual separation agreement. Statutory payments which are due to the employee must be included in the sums payable under the mutual separation agreement.

Norway Small Flag Norway

If a dispute has arisen regarding the validity of a termination of employment, an employee may waive his/her protection against unlawful dismissal by entering into an agreement. Employers tend to enter into such agreements as an alternative to starting a termination of employment process. This is not regulated in the WEA. It is assumed in legal theory that employees may waive their rights in return for a severance agreement even though no dismissal notice has been issued.

Philippines Small Flag Philippines

Termination of employment by the employer can only be based on just or authorized causes and must strictly comply with the procedural requirements discussed above.

If the termination of employment is made at the instance of the employee, the employer may require the employee’s execution of a quitclaim for amounts received from the employer as settlement of all employee claims. Quitclaims are valid and enforceable, provided:

  • the employee executes the quitclaim voluntarily;
  • there is no fraud or deceit on the part of any of the parties;
  • the consideration of the quitclaim is credible and reasonable; and
  • the contract is not contrary to law, public order, public policy, morals or good customers, nor prejudicial to a third person with a right recognized by law.

United States Small Flag United States

Separation agreements are not required under U.S. law, but are commonly entered into whenever the employer provides any termination- related payments on severance. Such agreements must generally meet a number of requirements to be enforceable, including the following: (1) the waiver must be knowingly and voluntarily executed by the employee; (2) the process for obtaining the waiver must be free of employer fraud, undue influence, or other improper conduct; and (3) the agreement must be supported by consideration over and above any benefits to which the employee is otherwise entitled.

Certain claims however, cannot be waived as a matter of law. Such claims include: waiving the right to file a charge with the Equal Employment Opportunity Commission (EEOC) and claims under the Fair Labor Standards Act (FLSA). Several states (including California, Florida, Illinois, New York, and Texas) prohibit waiver of claims for unemployment and/or workers’ compensation benefits.

Further, specific criteria must be satisfied for a waiver of federal age discrimination claims to be considered “knowing and voluntary” under the Older Workers Benefit Protection Act (“OWBPA”), as discussed above in response to Question 4.

Brazil Small Flag Brazil

Mattos: Yes. Until the Labor Reform, the execution of releases did not prevent the employee from bringing a claim against the employer. After the Labor Reform, the new law introduced the possibility to ratify out-of-court settlements with the local labor court. In the event of termination, the employer and employee may settle a release upon the payment of the statutory severances and any other discretionary compensation. Then the parties may agree to ratify such release with the court, provided a lawyer or the applicable union of employees assists the employee in this proceeding. If the court ratifies the agreement, the employee cannot claim against the employer anymore.

The Labor Reform also validates employees’ full release in case of voluntary redundancy plans for termination which must be negotiated with the relevant employees’ union.

Turkey Small Flag Turkey

The employer and the employee may execute a mutual termination protocol, but it does not in itself constitute a waiver to initiate a reinstatement claim by the employee. The job security provisions under TLC, allows the employee to claim reinstatement within one month following the termination and the High Court establishes that a waiver from such right to claim reinstatement is not possible. However, as the mutual agreement shall be made in writing and the associated payments shall be made via bank transfers, mutual agreements do mitigate the risk of reinstatement and increase the likelihood of dismissal of such cases as long as a reasonable benefit is paid.

Thailand Small Flag Thailand

Where the employee is terminated, any agreement entered by the employee to waive the right to claim statutory payments for termination is void under Section 150 of the Civil and Commercial Code.

Nevertheless, in practice, such waiver is acceptable where the employee resigns.

Switzerland Small Flag Switzerland

The parties can terminate the employment agreement at any time, based on their mutual consent, by entering into a termination agreement.

Entering into such an agreement typically results in the employee waiving certain mandatory rights pertaining to the employment relationship. In particular, the parties may agree to terminate the agreement before the end of the contractual notice period, which implies that the employee renounces part of their right to their salary. In addition, the parties usually agree on terminating the employment relationship on a particular date, causing the employee to waive their right to be protected against termination and to receive their salary during a certain period of time if they are prevented from working due to illness.

By law, the employee may validly waive claims resulting from mandatory rights only one month after the end of the employment agreement (Article 341 CO). Therefore, the validity of termination agreements is subject to limitations. According to case law, such agreements must include equivalent 'reciprocal concessions'. More precisely, the employer must grant the employee what they are legally and contractually entitled to obtain until the end of the notice period (including e.g. compensation for overtime or untaken vacation days), as well as an 'additional allowance' as a compensation for the waived rights. The Swiss Federal Supreme Court has not established clear criteria with regard to the method of calculation of this additional allowance.

Sweden Small Flag Sweden

An employee may waive his contractual rights. As a general rule, an employee cannot waive rights laid down in mandatory law. However, an employee may under certain circumstances waive mandatory rights, e.g., where a dispute has arisen regarding the mandatory right. Please note that an employee cannot waive rights set forth in the Swedish Discrimination Act.

New Zealand Small Flag New Zealand

Yes, subject to limitations. An employee can partly or fully settle issues arising from a personal grievance or breach of contract and forbear from or forego enforcement of his or her rights at law in consideration for payment or other benefits. There must be some form of employment relationship problem that needs to be resolved.

A settlement agreement, however, may not compromise an employee’s minimum entitlements under minimum entitlement legislation including the Minimum Wage Act 1983, the Holidays Act 2003, the Home and Community Support (Payment for Travel Between Clients) Settlement Act 2016, or the Care and Support Workers (Pay Equity) Settlement Act 2017.

Luxembourg Small Flag Luxembourg

An employer may conclude a settlement agreement with an employee whose employment contract is terminated. To be valid the settlement agreement must include reciprocal concessions. For instance, employers may no longer grant garden leave as a concession for which the employees will waive their rights in return. The payment must therefore be extra-legal and sizeable. There are also formal conditions to comply with.

Romania Small Flag Romania

Mutually agreed exit is one of the possible employment termination routes expressly permitted by the Romanian legislation. Except for the requirement of agreeing the mutual termination in writing (including exit date), there are no express legal conditions on content Thus, not only is this typically safest from an employment litigation risk perspective, but also allows parties an opportunity of most flexibility on the exit terms, including the termination date.

However, employee waivers are highly debatable as there is a high bar when it comes to protection of employee rights under Romanian law. Therefore, any clause which waives or limits the employee's rights recognised by law is null and void. In light of this restriction, any employee waiver needs to be carefully considered in terms of scope and actual validity and enforceability.

Peru Small Flag Peru

It is possible, but it would be subject to the following limitations:

  • The waiver of rights would be narrowed down to the possibility of claiming a compensation for occupational accidents or diseases, provided that the amount agreed and paid were reasonable.
  • The agreement could not include social benefits whose amount is set out by law. Therefore, in case the agreed amount of said benefits were minor than the legal amount, the agreement would be invalid.

The Netherlands Small Flag The Netherlands

If the employer and the employee reach a termination agreement they are free to exclude the termination payment. However, in most negotiations the payment will be considered, because the goal is to end the employment contract without following one of the ‘formal’ routes. Most employees will not sign a termination agreement without any remuneration.

Statutory rights of the employee based on the Dutch labour laws cannot be excluded in return for payment.

Austria Small Flag Austria

Please refer to the final paragraph of the answer to question 15. In addition thereto, it needs to be kept in mind that an employee could potentially challenge such a termination agreement if it turned out that pressure by the employer had been applied in order to achieve the employee’s consent.

Mexico Small Flag Mexico

N/A

United Kingdom Small Flag United Kingdom

A worker can validly waive his right to bring claims under employment legislation by entering into a settlement agreement, provided certain conditions are met. Firstly, the agreement must be in writing and it must relate to specified proceedings or complaints. The worker must also have received advice from a named independent adviser, who is covered by a contract of insurance, on the terms of the agreement and its effect on the worker’s ability to bring a legal claim against the employer. The agreement must also state within it that the conditions regulating settlement agreements have been satisfied.

The prescribed conditions do not apply to the waiver of contractual claims which are commonly included in the same agreement as statutory claims.

Armenia Small Flag Armenia

No.

South Korea Small Flag South Korea

Yes, such an agreement is referred to as a mutual separation agreement (or if part of a larger reduction-in-force initiative, an early retirement package). In a mutual separation agreement, the employee agrees to resign in exchange for – most commonly – an ex-gratia payment from the employer. There are no statutory formulas. Instead, the amounts offered are matters of contract; provided that, if an employer policy or regulation (including any collective agreements) stipulate a formula, the employer must follow its policy, regulation, or collective agreement.

In a mutual separation agreement, an employee may waive his right to further claims against the employer, post-termination covenants (e.g., non-compete, non-solicitation), and non-disparagement clauses.

Ireland Small Flag Ireland

Yes, an employee may enter into a form of settlement which waives his/her rights to make claims against the employer provided the agreement is in writing between the parties, the employer make an adequate payment to the employee, the agreement specifies precisely what rights and entitlements the employee is waiving and the employee is given an opportunity to obtain independent legal advice in relation to the meaning and effect of entering into such an agreement.

Croatia Small Flag Croatia

Croatian law does not provide for the possibility of worker and employer reaching agreement in such a way that the worker waives his rights in return for a payment, in case of termination of employment.

Bolivia Small Flag Bolivia

It can reach an extra-legal agreement, but in which the worker does not renounce his labour rights, but declares to have received the same, since in Bolivia labour rights are inalienable by law.

Monaco Small Flag Monaco

The employer and the employee may conclude a settlement agreement after the dismissal by which the employee waives his right to sue the employer for all causes related to the termination.

This settlement must provide for reciprocal concessions on the part of both parties.

Singapore Small Flag Singapore

Yes, an employer may do so. Employers may in some cases pay an additional sum as an ex gratia payment in exchange for the employee entering into a termination agreement (usually incorporating waivers of rights and liabilities) with the employer.

As regards the limitations that apply, the agreement should not contain terms that breach any laws. This includes the following prohibitions:

  • the EA prohibits employers and female employees from contracting out of any right to maternity benefits to the extent that doing so deprives the female employee of that right or removes/reduces the liability of the employer to make the required payments pursuant to such benefits; and
  • the Retirement and Re-Employment Act prohibits employers and employees from (a) contracting to exclude or limit the operation of the Act or (b) contracting to preclude any person from making a representation, claim or application under the Act.

Updated: June 24, 2019