Fair? No. Legal? Yes. There is no obligation for management to be polite, nice, fair, or respectful to employees (as long as they are not discriminating against a race, sex, religion, age over 40, or disability, etc.). And similarly, upper management could choose to side with the world's worst supervisor against the world's best employee. So they have a legal right to lay you off.

You can and should ask for something in exchange for signing a release (the no-fault clause)--you are potentially giving up rights, so they can pay for it. Even though it seems that they have a right to do what they did, they are obviously at least somewhat concerned (even if only that you'd bring an ultimately losing lawsuit that would still be expensive and distracting)--otherwise, they wouldn't need the release. You could try to negotiate for things like more severance; like paid up medial for a time; and/or good written recommendation letters in exchange for giving them a release.

Note that if the supervisor's inapproriate comments or other company behavior was discrmination or harassment against you because of your race, sex, religion, age, etc., you may have a work discrimiantion claim and/or lawsuit.

Generally, an employer has a right to lay off an employee, even after they report frustrations to management.  Doesn't make it fair, but it's allowed.  The difference is when the lay off is in retaliation for the employee making the complaint of unlawful behavior.  So, to answer your question I would need a little more information.  Such as, how long were you being treated in the manner you describe? And, when you complained to management, did you complain that you felt you were being harassed? Based on the limited facts in your question, I am unable to determine whether or not management's actions were legal or illegal in your situation.   I would like to know what exactly did you report?  Additional facts and answers to these questions would help to make a better assessment of your legal options in light of your lay off.  

Feel free to contact me in my office to discuss further.  Thank you for your question.

Deshonda Charles Tackett at Davis & Associates, PLLC,  Houston, Texas
(713) 227-2727