If you’ve been fired, laid off, or let go by your employer, you have important severance rights to protect, and an experienced California severance agreement lawyer can help.
There are only a handful of situations in which severance pay is required in California, but many employers choose to offer severance packages when they let employees go. However, there are no hard and fast legal guidelines that determine how California severance negotiations proceed. If you have questions or concerns about the severance package you’ve been offered, you’re well-advised to discuss the matter with an experienced severance package negotiation attorney.
When Employers Are Required to Provide a Severance Package
While employers are not required to offer severance packages in most situations, the following two conditions are exceptions:
- If your employer has a contractual obligation to do so, such as in the form of an employment practice or policy that states you’re entitled to severance in the event you are laid off, fired, or otherwise released
- If your employer led you to believe that you would receive severance – either via a written contract, a documented assertion in an employee handbook, company history of paying severance, or an oral assertion
When Employers Offer Severance Packages
Even though there is no severance pay requirement, some employers choose to offer severance packages as a demonstration of their gratitude toward employees – especially in response to many years of service on the part of the employee. Generally, however, severance packages are offered to employees who’ve lost their jobs on the condition that they sign severance agreements that waive specific employee rights in relation to the employer, other third parties, or both. As such, most severance packages are contracts between the employer and employee in which both of the following are addressed:
- The employer provides the employee who is leaving the company with a specific amount of money, benefits, or both.
- In exchange, the departing employee signs a waiver and a release of specific legal rights.
In so doing, the employer protects the company against any potential claims or future lawsuits that potentially can be brought by the departing employee (in relation to their employment or departure).
The Benefits Addressed
The kinds of benefits that can be addressed in a severance package include:
- Ongoing health insurance coverage
- Payment of accrued vacation time
- Payment of accrued paid time off (PTO)
The Rights Relinquished
In the process of accepting a severance package, the employee is generally required to sign a waiver and release of rights that is quite broad. An important relinquishment that is often included is the right to sue your employer for any of the following:
- Wrongful termination
- Unlawful harassment
- Unlawful discrimination of any kind
- Unlawful retaliation
Additional rights you may be asked to give up can include:
- The right to discuss the terms of your severance agreement – or specific additional matters – with third parties (called a confidentiality provision)
- The right to discuss your employer’s trade secrets
- The right to speak about the employer in negative terms (called a non-disparagement provision)
- The right to openly share whatever it is that led to your termination
- The ability to sue your employer for any known or unknown claims
Because the rights you give up in a severance package negotiation are considerable, it’s in your best interest to have a seasoned California severance negotiation lawyer in your corner.
Although employers have considerable leeway when it comes to the creation of severance packages, there are some legal restrictions regarding what the employer can require the departing employee to sign off on in the severance agreement, including:
- Your employer cannot require you to relinquish any rights that cannot otherwise be released by agreement under California law, such as the right to fight back against wage and hour violations through the filing of a lawsuit.
- Your employer cannot require you to sign a severance agreement to receive wages that you’re already owed.
- Your employer cannot include a term that forbids you from reporting the company’s commission of certain crimes.
- Your employer cannot include a term that forbids you from applying for unemployment benefits.
- Your employer cannot include a term that requires you to break the law, such as by perjuring yourself if called to testify against the company in a legal proceeding.
- Your employer cannot unlawfully restrict you from working for a competitor of the company (called a noncompete clause).
- Your employer cannot include waivers or terms that are so overly broad they interfere with your legal right to seek employment.
In addition to these restrictions, your employer must – if you are over the age of 40 – allow you at least 21 days to consider the severance package in question (before signing it) and an additional seven days after you’ve signed it to revoke your acceptance. Finally, your employer is barred from exerting undue influence over you, from obtaining your signature under duress, and from engaging in fraud to negotiate a severance agreement.
Undue influence refers to a kind of persuasion that is considered coercive. If your employer pressures you to sign off on a severance agreement to the point that they exploit your morals, your emotions, or your perceived weaknesses, it may qualify as undue influence.
Unconscionability is another concern that may render a severance package agreement unenforceable (or partially unenforceable). Unconscionability means strikingly or shockingly unfair or unjust, and the law addresses unconscionability in severance agreements in both the following ways:
- Procedural unconscionability, in which one party has considerably more bargaining power (the court is more likely to deem an agreement unconscionable when the employee is on the receiving end of the unfair terms)
- Substantive unconscionability, in which one or more terms in the contract are either one-sided or overly harsh
The concerns that can affect the validity of a severance agreement do not end there. Consider the following:
- There are special rules in place for claims that involve age discrimination.
- Severance agreements that violate public policy can be deemed unenforceable.
The Consequences of Accepting a Severance Package
The matter of whether or not you should accept a severance package that’s been offered is critical, and it hinges on what’s included in the contract (which will almost certainly require you to give up specific rights). If you do not understand each of the terms included – and their implications (which may be far-reaching), you shouldn’t sign. If the severance agreement offered isn’t in writing, you should ask that it be provided in document form. From here, it’s important to take the time necessary to consider the rights carefully that you’ll relinquish and the responsibilities you’ll take on. If your employer is pushing you to sign off on a severance agreement, it might signal an attempt to push unfavorable terms on you. One of the most important considerations to keep in mind is that – if your rights were violated by your employer during the course of your employment – accepting a severance package can leave you with no legal recourse regarding those violations. Ultimately, you owe it to yourself and your future to discuss the matter with a dedicated California severance negotiation attorney.
The Motivation Behind Severance Packages
Employees have the legal right to sue their employers for a wide range of employment violations, and employees who are fired, laid off, or otherwise let go have far more incentive to file such lawsuits. Employers are well aware of this fact, and they generally turn to severance packages to help offset the risk involved. Severance packages, in other words, work as a release that helps to ensure that no such lawsuits will be forthcoming. Generally, these contracts are legally enforceable – as long as they don’t contain any illegal terms – and they are generally upheld by the courts (even when the employer appears to get the better end of the deal).
How Severance Pay Is Typically Calculated
Although employers generally aren’t required to offer severance pay – as discussed – many do. There are several basic calculation methods used, including:
- Offering 1 to 4 weeks of pay for every year on the job
- Offering an arbitrary amount deemed fair by the employer
- Employing calculation guidelines laid out in the employee handbook (or in the company’s adopted policies)
Benefits, as mentioned, can also be included.
How Severance Pay Is Typically Calculated
There are certain situations in which you should think long and hard before signing a severance agreement, including:
- If you believe your termination is unfair in some way
- If you are being let go after your employer engaged in an employment law violation of some kind, such as retaliation or harassment
- If the severance contract includes a nondisclosure or noncompete clause (the long-lasting implications of such clauses can be considerable)
- If you witnessed wrongdoing on the part of your employer or you think your rights as an employee were violated in some way
- If the severance agreement includes an admission of fault on your part (especially when not true) – such an admission can harm your future employment prospects
If any of the above apply in your situation, you should call us before you sign – severance agreements contain provisions that can affect your rights. There are many important separation terms, including severance pay, stock options, awards, COBRA, benefits, and confidentiality and release to consider. Call Blair & Ramirez LLP to negotiate and get you what you deserve.
The answers to some of the most frequently asked questions on the topic of severance package negotiations may answer some of your own.
Is it necessary to have a California severance negotiation lawyer?
What if I can’t afford to hire a severance package attorney?
Being let go from your job represents a serious financial setback, and it isn’t a great time to take on an additional legal expense. Fortunately, however, reputable severance package attorneys typically work on contingency, which means their pay is contingent upon how their cases are resolved. If your case ends in a settlement or court award, your attorney will receive a prearranged percentage of that amount, but if your case does not prevail, you won’t owe anything.
When is the right time to consult an attorney?
If you have been offered a severance package, consulting with a savvy severance agreement lawyer sooner rather than later is always to your advantage. Your attorney will help to ensure that you understand each of the rights you are relinquishing, each of the responsibilities you are taking on, and the long-term and far-ranging implications of each. Don’t sign a severance agreement until you’ve discussed the matter with a skilled severance package negotiation attorney.