If an employer is planning on terminating an employee whom the employer feels may be litigious or a "high-risk termination," then the employer may want the employee to sign a carefully prepared severance and release agreement. Giving an employee severance (i.e., money or something of value) in exchange for the employee signing a release of all claims against the employer is a legally acceptable mechanism for an employer to avoid potential litigation.
If you are acquiring a Company through purchase and you are not paying close attention to potential Labor issues, you could be creating serious and risky problems for the future. It is extremely important to understand that liability in the context of Labor and Employment related issues are governed by Contract and Common Law Successorship with an overriding theme of "protecting the little guy." This is vastly different from the traditional Corporate Veil Piercing Analysis that exists in traditional Corporate Law.
Over my rather lengthy career as a Management-Oriented Labor/Employment Lawyer (started November 6, 1972 with the Walgreen Company), I have seen a drastic and very unfortunate change in the Employer-Employee relationship. Over the last ten (10) years, there has been an over 500% increase in Employee Litigation. You do not need a Lawyer to tell you that Employment Litigation is expensive, both in the financial commitment and the time-productivity loss commitment. Here are a few of my suggestions for trying to eliminate or limit Employee Litigation:
One of the most frequent questions that I get from our clients is "How can I fire an employee but not end up with a lawsuit against our company?"