Severance Pay

Have you been terminated and offered severance pay? Has your employer asked you to sign a separation agreement in order to receive the pay? Should you sign the agreement and accept what's being offered?

The bottom line is that a severance agreement is a contract, which means you should take some time to consider all of its terms before signing it. This is especially true if you have taken medical or pregnancy disability leave, requested accommodations, opposed unlawful conduct by your employer, or complained about discrimination, harassment or pay issues. If you believe that the decision to terminate your employment relates to any such activity, seek advice from an attorney before you sign the agreement.

The attorneys at Bryant Whitten Law will review the agreement at no cost and advise you about your rights.

The following are some common questions and answers:

1. Does my employer have to offer me severance pay?

No. Generally, employment in California is "at will" and most employers require employees to sign an acknowledgment form on the first day of employment. As such, the employer can terminate the employment for any reason or no reason, so long as it's not for an unlawful reason.

Call us for a free consultation if you were terminated after taking medical or pregnancy disability leave, requesting accommodations, opposing unlawful conduct by your employer, or complaining about discrimination, harassment or pay issues.

2. Why is my employer offering severance pay if the law does not require it?

In some cases, an employer offers severance pay to employees being laid off with the hope of making the transition back into the job market a little easier for the employee.

Many times, an employer anticipates litigation and wants an employee to waive the right to sue the employer in exchange for a few weeks of pay.

An employee who signs a separation agreement and accepts the pay offer waives the right to sue the employer for all claims, if the agreement is proper. Employees can still sue in certain circumstances, but this is very rare.

3. How much severance pay does the employer have to offer?

An employer does not have to offer money as part of the severance package, but most provide you with something of value. Recently, employers have been telling employees that the employer will not challenge an application for unemployment insurance benefits if the employee will sign the agreement. This could be enough if in fact the employee is not eligible for unemployment because the termination was for serious misconduct or poor attendance. However, this is not enough where the employee has been terminated for poor performance, which will not usually prevent you from getting the unemployment benefits. In such cases, the employer must pay money or something else of value.

Just about any amount of money is enough to make the agreement enforceable because money has value and the employer has no obligation to pay it other than an exchange for the agreement to waive claims against to the employer.

4. What should be in the separation / severance agreement?

Terms commonly found in severance agreements typically include:

• A general release with a Civil Code section 1542 waiver releasing all known and unknown claims.

• Confidentiality

• No admission of liability

• No present or future employment

• Non-disparagement clause which can also set forth what job reference, if any, will be given to any future employer

• Return of company property and non-solicitation of customers clause

5. What if I am over the age of 40 years old?

Special laws, like the Older Workers Benefit Protection Act (OWBPA) and Age Discrimination in Employment Act (ADEA), protect employees that are 40 years old or more. The OWBPA says that a severance agreement must include time to consult with an attorney and a brief period after signing the agreement wherein you can change your mind about the agreement. If the employer is offering severance to a group of employees, a longer time to consider the agreement must be offered. Under the ADEA, the employer must provide information about other employees, if the severance is offered as part of mass layoffs or reductions in force (RIF).

6. Do I have to sign a severance agreement in order to get my final paycheck?

No. An employer cannot require you to sign an agreement in order to get your final pay.

7. What should not be in a severance agreement?

Employers should not ask you to waive claims for unpaid wages where there is no dispute how much is owed. You should not be asked to waive the right to file for unemployment insurance or worker's compensation insuranc e.