Severance Agreement Negotiation Attorneys
Losing your job is never an enjoyable experience. The reality is that companies regularly downsize, cut budgets, or terminate employees for other reasons. When this happens, employers may offer a severance package to departing employees.
Employees may see a severance package as a welcome benefit. Severance packages often involve ongoing payments and COBRA benefits for a period of time while you find a new job. However, they can also contain unfavorable provisions that can restrict your rights as a former employee.
While you might be tempted to sign immediately after being offered a severance package, keep in mind it is not an all-or-nothing situation, and you might have the ability to negotiate certain terms. If you have been offered a severance package by your employer, it is in your best interests to have an experienced severance package negotiation lawyer review the agreement and identify potential opportunities for negotiation.
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What is the standard severance package in California?
Severance packages can be as unique as different employers and employees, and many companies will base the terms on the employee’s role in the company, their salary, and numerous other factors. However, the terms of a severance package are often similar from one company to another. These include:
- Severance pay, which can be calculated based on the employee’s earning level and time at the company, or may be an arbitrary number chosen by the employer.
- Extended health benefits under COBRA.
- Waiver of the employee’s right to file an employment lawsuit for wrongful termination, discrimination, or harassment.
- Non-disclosure agreement requiring the employee to keep certain proprietary information of the employer confidential and restricting the employee from discussing severance terms with others.
- Non-disparagement clause that prohibits the employee from saying anything bad about the company to others.
- Non-compete agreements that limit the employee’s ability to work for a competitor or start a competing operation on their own (more on this type of agreement below).
Most people see the severance pay and extended benefits. and jump to sign on the dotted line. However, this might not be the best option, as you may also be signing away important rights. Depending on what you do next with your career, there may be potential consequences for accidentally violating the terms of the agreement. You should review a severance agreement and its implications with an attorney prior to signing.
Should I accept a severance package?
Many people have no issues when it comes to severance agreements and packages. They accept it, receive the benefits, and move on to a different job without any problems. However, there are some questions you should ask yourself before you sign:
Do you believe that you were fired for an unlawful reason, such as discrimination or retaliation? Have a lawyer evaluate whether you have the right to file an employment claim. This claim may result in far greater compensation than the severance package your employer hopes you sign, as it waives your right to sue.
Does the agreement contain any unenforceable provisions? For example, non-compete agreements are largely unenforceable in California, yet many severance agreements still contain them. Other unenforceable terms might include:
- Waiving your right to seek unpaid wages
- Requiring that you sign the agreement to receive your final paycheck
- Waiving your right to report unlawful conduct of the employer
- Terms requiring you to commit perjury or other offenses
The agreement also cannot be so vague or broad that you are prevented from seeking subsequent employment. Your employer also cannot enforce terms of a severance package accepted under fraud, undue influence, or duress.
The best way to know whether it is beneficial to accept a severance package is to seek the advice of an experienced severance negotiations lawyer. We can assist you in identifying unfavorable or unenforceable terms, as well as negotiating to have those terms removed so you can still reap the benefits of the agreement.
Do I need a lawyer to negotiate severance?
Severance negotiations generally take place informally, and employees are certainly allowed to negotiate on their own. However, in order to present your strongest possible case, you should have a complete understanding of your rights under California law and the terms you should negotiate. A lawyer will have this information and approach your employer from a strong position.
There are some cases in which negotiation is not the best option. If you were wrongfully terminated, for example, you should seek remedy outside of the severance agreement process by speaking with an experienced attorney.
Should I take severance or unemployment?
In many situations, terminated employees can seek unemployment benefits, which help bridge the gap between jobs. In many parts of the country, former employees cannot receive severance pay and qualify for unemployment at the same time. The good news is that, in California, you usually do not have to choose between the two.
Under California law, severance pay is considered to be payment in recognition of your past service to the company, not wages—which would disqualify you for unemployment. One exception to this rule is when severance is required based on a company policy or benefits plan. There are other exceptions when severance might be considered to be wages, so have a lawyer help you assess whether you qualify for unemployment or not depending on your individual circumstances. This may influence your decision on accepting the severance package.