Overbroad Waivers and Releases

By Doyice Cotten

Waivers and releases sometimes fail because the party that drew up the waiver made the waiver overbroad. Whether overbroad because it attempts to protect too many parties or because it attempts to protect against essentially “any reason whatsoever.” Of course, what is acceptable in a waiver varies from state to state. The following two non-sport waivers or releases serve to illustrate some of the standards existing in New York State.

 Guerra v. Trece Corp. (2021) involved a settlement agreement between a restaurant owner and a former employee regarding wages. The court examined the agreement to determine if its terms were overbroad. The terms included a statement that both parties would be barred from asserting “any and all known claims, and liabilities of any kind … for any reason whatsoever” as of the agreement’s effective date. The court stated that courts in the district typically reject releases that “waive practically any possible claim against the defendants, including unknown claims and claims that have no relationship whatsoever to wage-and-hour issues.

In this case, however, the court noted that the agreement affected only the plaintiff and defendant (and would not impact other individuals bringing similar claims. In addition, the court pointed out that Lim was no longer the employer of Guerra. Finally the court considered that the agreement was a compromise by the parties and not a waiver of statutory rights. Subsequently,  the court enforced the agreement.

The second non-sport release case, Gomez v. Shine Services, LLC (2021) involved a settlement between an employer and an employee regarding an issue in which the employee was paid with a free room rather than in money. The court determined that it could not approve the settlement agreement because the agreement purported to release the defendants for

. . . their past, present, and future predecessors, successors, assigns, parents, subsidiaries, affiliates, divisions, officers, trustees, directors, shareholders, members, partners, employees, agents, heirs, administrators, executors, representatives, insurers, reinsurers, business managers, accountants, attorneys, in their individual and representative capacities, and all persons acting by, through, and under, or in concert with any of these (the “Releasees).

 It stated that the language was “overbroad” because

. . . similar language, designed to extend the benefit of a release well beyond the settling defendants, cannot be approved as fair and reasonable to an FLSA plaintiff – even when used in connection with an otherwise-acceptable release – because such language could be “applied to absurd effect” to bar future claims against a wide range of unknown and unidentifiable persons and entities having no real connection to the case being settled (including, in this case, defendants’ “past” and “future” officers, business managers, accountants, and attorneys, in their “individual” capacities).

The court did not approve the agreement and gave instructions regarding a revised agreement.

The reader might want to examine the waiver you are using and see how broadly it attempts to protect. Keep in mind, courts in some states (e.g., New York, Wisconsin, Oregon) seem to be very strict while courts in some states seem to not worry about the issue.