Severance Agreements
Severance agreements can be difficult and time consuming to draft for employers. Please contact our firm to ensure the matter will be handled with competency and care.
Severance Negotiations
A severance package includes pay and benefits that an employee may receive after they are terminated against their will. Many employers offer severance packages or severance pay to ease the adverse effects that come with losing a job. In exchange for severance, employees are typically required to waive their right to sue their employers based on the termination.
California does not require employers to offer severance pay, unless a severance package is written into an employment contract. However, many companies in California offer severance as a courtesy to long term employers. Employers are also incentivized by severance agreements that can hold them free of certain liability.
Severance Pay, Severance Packages, & Severance Agreements
The concept of “severance” is tricky. Let’s break it down:
-
Severance Pay: Payment made by an employer to a former employee when the employer terminates the employment.
o Pay is in addition to worker’s regular pay -
Severance Package: Payment AND additional benefits made by an employer to a former employee when the employer terminates the employment.
o Packages may address insurance and stock options -
Severance Agreement: A contract between an employer and employee stating the employer will pay money/benefits and in exchange the employee will give up a certain right. That right is usually the right to sue the employer.
o o Agreements may restrict an employee’s right to sue based on age, race, gender, or religion discrimination.
Severance Agreements & Rights
As mentioned above, severance agreements may include provisions that restrict an employee’s right to sue based on age or race discrimination.
An employer can restrict several different rights in severance agreements, including:
An employer can restrict several different rights in severance agreements, including:
- Right to sue for defamation
- Right to sue for wrongful termination
- Right to sue for harassment
- Right to speak negatively about the employer
- Right to discuss company trade secrets
However, an employer may not include provisions in severance agreements that restrict an employee’s:
- Right to pursue California wage & hour claims
- Right to report crimes
- Right to wages already earned
Severance agreements can be difficult and time consuming to draft for employers. Likewise, severance agreements can be hard to understand for employees, especially in ensuring no rights will be violated. If you are an employer looking into severance packages or dealing with employment law matters, or an employee facing employment issues, please contact our firm to ensure the matter will be handled with competency and care.
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