Legal Definitions - tender back rule

The tender back rule is a legal principle that generally requires a person to return any money or benefits they received under an agreement before they can legally challenge that agreement or pursue a claim they supposedly waived.

This rule is most commonly encountered in employment law, particularly when an employee signs a waiver or release agreement in exchange for some form of payment or benefit. The core idea is to prevent someone from simultaneously keeping the benefits of an agreement and suing to invalidate it or pursue claims that the agreement was intended to settle. If you accept a payment in exchange for giving up certain legal rights, and then you decide you want to assert those rights anyway, the tender back rule typically mandates that you must first "tender back" (return) the payment you received.

It's important to note that this return of benefits must usually happen before you start your lawsuit. The rule can apply even if you believe the agreement was unfair, made under pressure, or even fraudulent, though there are specific exceptions, particularly for certain federal anti-discrimination laws.

Here are some examples to illustrate the tender back rule:

• Example 1: Challenging a Non-Compete Agreement

  Imagine a senior executive, Sarah, is offered a substantial bonus payment by her company in exchange for signing a non-compete agreement. This agreement states that if she leaves the company, she cannot work for a competitor for two years. Sarah accepts the bonus and signs the agreement. A year later, she resigns and is offered a dream job at a competing firm. She believes the non-compete agreement is overly broad and unenforceable. If Sarah wants to challenge the validity of the non-compete agreement in court so she can take the new job, the tender back rule would likely require her to return the bonus payment she received for signing the agreement before she can initiate her legal challenge.

  How this illustrates the rule: Sarah received a benefit (the bonus) in exchange for waiving a right (to work for a competitor). To reclaim that right by challenging the agreement, she must return the benefit she received.

• Example 2: Settling a Consumer Dispute

  Consider Mark, who purchased a new appliance that turned out to be defective. After several unsuccessful repair attempts, the manufacturer offered Mark a goodwill payment of $500 and a new, upgraded model of the appliance, in exchange for him signing a release form that waived all his rights to sue them for any issues related to the original defective product. Mark accepts the payment and the new appliance. Later, he discovers that the original defect caused significant water damage to his home, far exceeding the $500 payment. If Mark decides he wants to sue the manufacturer for the water damage, the tender back rule would generally require him to return the $500 payment and potentially the value of the upgraded appliance before he can proceed with his lawsuit, even if he argues he was unaware of the full extent of the damages when he signed the release.

  How this illustrates the rule: Mark accepted consideration ($500 and a new appliance) for releasing his claims. To pursue those claims later, he must return the benefits he received under the release agreement.

• Example 3: Age Discrimination Claim (An Exception)

  Suppose David, a 60-year-old employee, is laid off and offered a severance package of $20,000 in exchange for signing a general release of all claims against his employer. David signs the agreement and receives the payment. A few months later, he suspects his layoff was actually a form of age discrimination, a violation of the Age Discrimination in Employment Act (ADEA). If David decides to sue his former employer under the ADEA, he would generally not be required to return the $20,000 severance payment before filing his lawsuit. This is because federal courts have carved out specific exceptions to the tender back rule for certain anti-discrimination statutes like the ADEA, Title VII, and the Equal Pay Act, to ensure employees are not deterred from pursuing these important claims.

  How this illustrates the rule: This example highlights a key exception. While the general principle of the tender back rule would normally apply to a severance agreement, specific federal laws designed to protect against discrimination override this rule, allowing plaintiffs to pursue their claims without first returning the consideration received.