A severance agreement, also called a separation or termination agreement, is an employment contract that includes terms under which employment will end. Most severance agreements promise an employee a sum of money, called severance pay, in exchange for the employee giving up their right to make a legal claim against the employer. Employees may be tempted to sign
Should I Sign a Severance Agreement?
Severance agreements quickly so they can continue paying their bills while looking for a new job. However, since employees may be giving up valuable legal rights by signing the severance agreement, it is important to have an employment attorney review the proposed agreement. An attorney can negotiate changes and help you understand the rights you may be giving up. It may be smarter not to sign the severance agreement and pursue a legal claim against your employer.
For example, suppose the employer fired the employee for violating the employee’s contract. In that case, the employee may have a right to pursue a lawsuit against the employer for damages. The damages the employee may obtain through a lawsuit could be significantly greater than the compensation in the severance agreement.
Employers are not required to pay severance pay in California, and there is no general standard for severance payments unless they are required under an employment contract or a company policy. Employers mainly offer severance agreements so they can save money by avoiding potential legal claims in the future from former employees. You should only sign a severance agreement once you discuss the agreement with an employment attorney.
The Purpose of Severance Agreements
Severance agreements used to be less common now. Until recently, companies only used severance agreements when hiring executive-level employees. Currently, companies may require non-executive employees to sign severance agreements.
Employees often negotiate the employment contract’s terms, including a severance agreement, in case of an involuntary separation. An employer may require an executive or other type of employee to sign a severance agreement as a condition of employment. In other cases, employers offer severance agreements when they lay employees off at the end of their
Severance pay for executives and management-level employees is generally larger than payments offered to non-managerial employees deciding whether the proposed severance pay is fair depends on the potential value of the employee’s legal claims that the company is asking them to forgo. If you do not know whether the amount is worth signing the severance agreement, you should discuss your case with an experienced employment attorney as soon as possible.
The Legality of Severance Agreements
In many cases, California courts will uphold severance agreements. However, California and federal laws prohibit employers from including certain terms in severance agreements. Some terms may be unenforceable if they violate public policy. For example, a California court will strike down the non-compete provision if the severance agreement contains a Non-compete provision. Employers cannot require employees to release a claim for indemnity under the labor code in California.
Additionally, although some terms may be legal, they may be negotiated so the employee is treated more fairly. Specifically, a non-disparagement clause and the release should be mutual when possible, and the agreement should specify the information the employer can share about the employee. Having an employment lawyer review and discuss a proposed severance agreement will help the employee understand whether the agreement is enforceable in a California court.
Can My Employer Require Me to Sign a Severance Agreement?
An employee must enter a severance agreement voluntarily. Employers cannot force employees to sign severance agreements. Generally, employers are offered money that an employer is not legally obligated to pay them as an inducement to sign the severance agreement. However, an employer cannot require an employee to sign a severance agreement to be paid compensation the employee has already earned. For example, an employer cannot tell an employee you must sign the severance agreement to receive your last paycheck.
Under California law, employers must pay all employee wages unconditionally when the employment terminates. This payment should include crude vacation pay and other earned benefits. An employee should seek legal advice if an employer withholds pay unless the employee signs a severance agreement.
Separation Agreement Attorneys Serving Riverside
Deciding whether or not to sign a severance agreement can be difficult. On the one hand, The compensation provided in the severance agreement can help you as you look for another job. On the other hand, if you sign the severance agreement, you will not be able to pursue a claim against your employer. You should consider whether the agreement offers something of greater value than the rights you are surrendering by signing the agreement. If the agreement gives an employee nothing other than the wages they have already earned, there may be no incentive to sign the agreement.
Many severance agreements only offer a nominal payment that is only sufficient if the employee has no realistic legal claim to assert against the employer. When an employee has a valuable legal claim, an employment attorney can help the employee negotiate a larger severance payment. Understanding the advantages and disadvantages of signing a separation agreement can be complicated. An attorney can help you understand your options and decide whether to sign the severance agreement. Before signing the agreement, you should understand what you are giving up in exchange for a severance payment.
Discuss Your Case with a Riverside Severance Agreement Attorney
The employment lawyers at HKM Employment Attorneys are prepared to help you review your Severance agreement, explain the terms, and answer any questions so you can make an informed decision. We can help you identify your options, and we can negotiate more favorable terms for you. If you’ve been offered a severance agreement, or you’ve already signed a severance agreement but have questions about your rights, don’t hesitate to contact HKM Employment Attorneys to schedule an initial consultation.