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Kentucky Supreme Court Upholds Validity And Use Of Employment-Based Releases

The Kentucky Supreme Court recently issued a significant opinion for employers that offer release agreements to employees. In overruling prior precedent, it found that a validly executed release waives the employee's right to sue, and that an employer may have the case dismissed when an employee sues after signing such a release.

 

When Humana eliminated Colleen Blose's job due to a reduction in force, it offered her a Release. This agreement provided her 12 weeks of pay and health benefits in exchange for waiving her right to sue for any possible employment claim.

 

Almost four years after signing this Release, Ms. Blose sued Humana for disability discrimination under Kentucky law. The trial court dismissed the suit based upon the Release. The Court of Appeals reversed, holding that Ms. Blose should have the opportunity to show that the Release was not validly executed.

 

The Court of Appeals also held (relying on a prior decision) that even if the Release was valid, Humana's remedy was a counterclaim for its breach - not a dismissal of the case. This conclusion essentially eviscerated the Release's purpose.

 

The Kentucky Supreme Court reversed the Court of Appeals (and overruled the prior precedent) on this issue, explaining that an employee may waive a claim under the Kentucky Civil Rights Act. It also held that a release "extinguishes a claim or cause of action." Applying these principles, it concluded that a validly executed release waives a former employee's right to sue and the remedy for violating that agreement is dismissing the case.

 

This decision should give a Kentucky employer confidence when presenting an employee with a release agreement. If the employee cannot show fraud, duress or bad faith in executing the release, but sues anyway, the employer can enforce the benefit of its bargain and have the case dismissed.

If you have any questions regarding this, or any other legal issue, please feel free to contact a member of Greenebaum's Labor and Employment Practice Group. Click here for a complete roster.

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