Review Your Settlement Agreement Templates to Revise the “Waiver of Unknown Claims” Language

If you have template settlement agreements, release agreements or severance agreements, it is time to pull them up and make some quick amendments to what is often language in ALL CAPS – what is called the “1542” language. (And, of course, check with your employment counsel – there may be some other modifications needed if you are using a template.)

Effective January 1, 2019, Section 1542 now reads (with new language in bold):

A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.

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Basically, California Code of Civil Procedure Section 1542 precludes the waiver of unknown claims unless the protections of the section are expressly released. To make that waiver of unknown claims effective, the actual language of Section 1542 must be included in any agreement, and the parties to the agreement must acknowledge that they are waiving their rights under the law. All this has been around for years, but now there are the slight changes highlighted above in the language of the statute. And since the language must be included (exactly), you need to update your agreements!

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