Severance agreements, also referred to as separation, release or termination agreements, are legally binding contracts/agreements entered into by an employee and employer that outline the terms of an employment termination. Termination of employment can include an employee being fired or laid off by the employer, as well as an employee’s decision to quit their job and terminate the employment relationship. In Los Angeles, severance agreements can be entered into at that beginning of the employment relationship, or an employer can present a severance agreement and request that the employee sign a severance waiver when the employment relationship is terminated.
California state law allows severance agreements to be both valid and legally enforceable, This is because employers and employees have the right to negotiate all aspects, conditions and terms of the employment relationship. As a result, a severance agreement can be included as part of the overarching employment contract, as well as a stand-alone separate agreement. Regardless of the form of the severance agreement, it can set forth the specific terms regarding the date that the employment relationship will terminate, conditions for termination, severance payments, references, procedure for the return of company property after termination, and a release of claims against the employer. The inclusion of a release of claims provision typically constitutes a waiver of liability regarding potential legal claims that the employer can bring against the employer.
Enforceable Severance Contracts in LA
When an employer terminates or lays off specific employees, while retaining other employees they could be accused of discriminating against the terminated employee because of race, sex, age, national origin, disability or religion. If such termination was found to be based on such protected employee characteristics, that employer could be found to be guilty of violating Title VII of the U.S. Civil Rights Act, as well as California’s Fair Employment and Housing Act. In order to avoid the risk of lawsuit, employers typically offer additional compensation and/or benefits to an employee as part of the severance package. The receipt of such compensation and/or benefits can be made dependent on the employee agreeing to sign a release of liability waiver for all claims that could be brought with regards to the employment relationship.
An employer can ask an employee to enter into an agreement whereby the employee agrees not to exercise their rights under federal or state law, including those providing protection against discrimination based on an employee’s protected characteristic. A waiver of legal rights is a serious decision that should not be entered into without careful consideration and review. Thus, it is a good idea to have a severance agreement, and any connected waivers of liability, reviewed by an attorney before such an agreement is signed by the parties. When reviewing a severance agreement, it must be determined whether:
- The employee knowingly and voluntarily consented and agreed to enter into the severance agreement;
- The severance agreement was supported by consideration ie. something of value that the employee was not already entitled to receive; and
- This consideration cannot be a pension benefit, vacation days or any other benefit that the employee was already entitled to receive before the severance agreement was entered into.
Exceptional Legal Services and Reviews for Employment Contracts
Severance agreements are designed so that both employers and employees know what to expect when the employment relationship is terminated. Thus, it is a prudent decision for both an employer and employee to have their severance agreements reviewed by a trained and licensed attorney. The lawyers at HKM Employment Attorneys LLP can provide you with an initial consultation to discuss your case. We have offices in Los Angeles, California.