Severance Agreements
If you have recently been notified that your employment is being terminated, you may have been offered a severance agreement by your employer. A severance agreement is a contract between you and the company you work for. This contract outlines expectations of each party in the wake of your termination, in the event that you agree to those expectations by signing the agreement. Chances are that your employer is attempting to offer you compensation and/or an extension of some of your employee benefits in exchange for surrendering your right to sue them for wrongful termination. It is important that you allow an experienced employment attorney to review your severance agreement before you sign it. Enforceable contracts are legally binding. Meaning, if you do not honor “your end of the bargain,” as spelled out in the terms of the separation agreement after you sign it, your employer could sue you, demand repayment of any compensation paid to you as part of the agreement, or otherwise hold you accountable for your breach.
Allowing an experienced attorney to review your severance agreement will allow you the peace of mind that accompanies making informed decisions. If the severance agreement is fairly constructed and the benefits of signing it outweigh the potential negatives of doing so, you can feel confident in accepting the terms of the contract. If, however, our team discovers that the contract is unfairly constructed or unreasonably steps on your rights as a worker, you can feel confident about your choice to either reject the agreement or to accept the agreement understanding full well what the consequences of that agreement mean practically. Our firm strongly believes that
workers’ rights are sacred and that each worker, regardless of circumstance, deserves to understand what their rights are and how to effectively exercise them. As a result, we choose to offer consultations - free of charge - to both
documented and undocumented workers who have questions about their rights under the law. If you have been offered a severance package, connect with our firm as soon as you can so that we can review the terms of your contract on your behalf before the time permitted to consider this agreement runs out.
Compassionate Representation of Workers Facing Termination
Because California law does not require employers to offer severance agreements to employees when they are being terminated, employers enter into these agreements because they stand to benefit from them somehow. Most of the time, employers offer severance agreements because they are concerned that the employees being terminated may choose to sue them for wrongful termination. It is partially for this reason that it is so important to have an experienced attorney from our firm review your severance agreement before you sign it. We have extensive experience reviewing severance agreements and we understand what both fair and unfair contracts look like. We will be able to objectively analyze whether your employer is attempting to take advantage of you at this time. We can then inform you of both the potential pros and cons of accepting or rejecting the agreement as it stands.
Our team is passionate about
workers’ rights. We do not choose to represent employers. Instead, we only take on cases filed by workers. As a result, you can feel confident that our firm’s reputation for excellence and our client-focused approach to representation are both rooted in our devotion to workers’ rights and workers’ rights alone. If you have not yet scheduled a no-cost, confidential, no-risk case evaluation with our team, please do so now. Investing a little bit of your time now may benefit you significantly in any number of ways moving forward.
When enforceably executed, a severance agreement between an employer and a former or soon-to-be former employee. If signed by both parties, an enforceable severance agreement is legally binding. This means that if either party breaches the expectations outlined within the terms of the contract, the other party can hold them in breach (violation) of the agreement. Depending on the circumstances surrounding the termination of the employee, the severance agreement may include a severance package consisting of compensation and/or an extension of certain employee benefits. In exchange for this “consideration,” the employer may insist that the employee surrender their rights to sue for wrongful termination, honor a confidential separation agreement, and/or agree to other stipulations related to the employee’s termination. If certain elements of the contract (including consideration) are not included and/or if the employer insists that the worker waive specific protected rights, the agreement may be rendered unenforceable.
Why Are Severance Agreements Offered?
Most of the time, employers choose to offer workers severance agreements in order to reduce the likelihood that affected workers will
file wrongful termination against the employer. Similarly, these agreements – which often feature terms concerning confidentiality – are extended when an employer is seeking to avoid a public relations problem and/or internal panic about the circumstances surrounding the termination of an affected worker. With that said, a desire to avoid negative “kickback” related to a termination doesn’t always result in the creation of a severance agreement that is fair. Sometimes, companies extend unfair severance agreements to terminated employees in the hopes that they’ll avoid having an attorney review the agreement and subsequently alert them to its unfairness. It is therefore important to avoid assuming that simply because your employer is motivated enough to offer you a severance agreement that they are initially motivated enough to offer you one that is fair.
Should I Sign a Severance Agreement if One Is Offered?
Whether it makes sense to agree to the terms of a severance agreement will depend upon several factors. When severance agreements are enforceable, they are legally binding contracts. Thus, you’ll need to approach the process of deciding whether to sign one with that in mind. Chances are good that in signing the severance agreement that your employer has provided, you’ll forfeit your right to sue your employer for wrongful termination. Depending upon the circumstances surrounding your termination, surrendering that right may mean surrendering the opportunity to hold your employer accountable – financially and practically – for any mistreatment you may have suffered while working for that company.
If the terms of your severance agreement ask you to release your rights to sue but fail to offer you adequate compensation in exchange for this surrender, it will likely not be in your best interests to agree to the terms of the agreement as written. Once our legal team learns more about your experience and reviews the terms of the agreement, we’ll be able to advise you of the potential advantages and disadvantages of agreeing to its terms. It may be possible for our firm to secure you more favorable terms before you sign away your right to sue your employer moving forward.
Agreement Structure and Timing Considerations
It is important to understand that you cannot legally be asked to sign away certain rights. While you may lawfully be asked to sign away your rights to sue your employer, under California law, your severance agreement cannot ask you to sign away your rights to workers’ compensation, minimum wage compensation, overtime, or unemployment insurance benefits. If your agreement contains a request for release of any of these rights as a condition of compensation and/or benefits offered by your employer, the contract is not enforceable under the law.
Severance agreements often require that terminated employees respect certain conditions related to confidentiality, future employment with the company, return of company property, solicitation of the company’s clients or customers, and non-disparagement. These conditions are usually lawful, provided that they aren’t phrased in ways that trample on a worker’s fundamental rights. Additionally, the opportunity to take advantage of a severance agreement may only be extended for a few days at most. As a result, it is important to have an attorney review the terms of your contract as soon as possible following notice of your termination. Otherwise, you may forfeit your right to accept the terms of the severance agreement once the clock runs out.
Unique Considerations for Older Workers
The Older Workers Benefit Protection Act (OWBPA), which protects workers 40 years old or older, insists that before employers can lawfully request a release of claims related to age discrimination as a condition of a severance agreement, certain legal requirements must be met. Specifically, the affected worker must be given a minimum of 21 days to consider the terms of the agreement and consult with an attorney, unless this consideration period is expressly waived by the affected worker. Additionally, after the agreement is executed by both parties, the affected worker must be allowed seven days to revoke their acceptance. As a result of these, and other, special protections afforded to older workers under the law, it is particularly important that you consult a lawyer before you consent to the terms of a severance agreement if you are over the age of 39.
Severance Plans Subject to ERISA
Certain severance pay plans are governed by a law known as the
Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. (ERISA). These plans are not governed by California law but are instead governed by federal law. This area of employment law is complex and often misunderstood. In a nutshell, determining whether a particular severance plan is subject to ERISA is outlined in a case referred to as
Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1 (1987). This Supreme Court case determined that whether ERISA applies to a specific plan depends upon whether an on-going administrative scheme is required to administer the benefits associated with the plan in question. You don’t need to understand this legal standard at this point. All you need to know is that if your severance agreement is subject to ERISA, our firm will clarify that for you and explain what it will mean practically for your case.
Contact Our Firm Today for a Free Case Evaluation
Generally speaking, you should not sign any employment contract without first allowing an experienced labor and employment attorney to review its terms. However, this “rule of thumb” becomes particularly urgent business when you’re presented with a severance agreement in the wake of employment termination. Entering into a severance agreement may be a mutually beneficial undertaking for both you and your employer. However, if you enter into a contract that is unfair or unreasonably compromises your rights as a worker, you may be left regretting your decision for years to come. In order to avoid entering into a contract that is more problematic than it is potentially beneficial, take a little time out of your day to allow our team to review the contract’s terms on your behalf. Investing this effort may save you from unintentionally making a big mistake. Our only interest is protecting your rights, so you have nothing to lose but a little bit of time by scheduling a free consultation with our team today. We look forward to speaking with you.