Severance Pay Lawyer in Los Angeles
Upon termination of employment, an employee may be offered severance pay. An employer might offer severance pay as compensation for an employee’s contributions to the company. However, it is often offered as a way for the employer to protect themselves against a former employee who might engage in certain actions that might harm the company. Severance pay is often granted as part of a separation agreement which is a legally binding contract between the employee and employer.
Most severance agreements will include a general release of claims, confidentiality agreement, and non-disparagement agreement. In exchange for compensation, employees are often asked to waive certain legal rights. Before signing or accepting a severance agreement, it’s extremely important that you fully understand the terms of the agreement.
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How Can a Lawyer Help Me with Severance Negotiations?
If you are negotiating a severance agreement or making a claim against your employer, it would be extremely beneficial to seek legal advice from an employment lawyer. A severance pay lawyer can help you understand your rights and negotiate the best severance package on your behalf. When you are represented by a California employment law firm, you can have peace of mind that your severance lawyer will guide you through every step of the severance negotiation process.
If you were wrongfully terminated, a lawyer can handle your wrongful termination claim. This reduces the time and stress you would need to endure, allowing you to focus on more important matters. If litigation becomes necessary, you will already have your legal team in place. This will let your employer know that you’re taking your employment claim seriously and are willing to fight for your rights.
Why Choose Mesriani Law Group?
If you or someone you love needs to negotiate a severance package, you want an experienced Los Angeles employment attorney negotiating on your behalf. Mesriani Law Group’s Los Angeles severance lawyers guarantee exceptional legal service to our clients and have the successful results to prove it.
Why you should choose Mesriani Law Group:
No Win No Fee Policy
Mesriani Law Group offers a No Win No Fee guarantee to all our clients, meaning if we don’t win your case you don’t have to pay us anything.
Proven Track Record
Since its establishment in 1996, Mesriani Law Group continues to be among California’s most trusted law firms. We have successfully negotiated severance packages for our clients that exceeded their expectations.
Experienced Severance Pay Attorneys
Rodney Mesriani and his team of dedicated lawyers have over two decades of experience and outstanding expertise in severance package negotiations.
Mesriani Law Group represents clients from different parts of Southern California and has received the highest ratings by our clients as seen in Yelp, Avvo, and Google.
Our diverse team of attorneys and paralegals also speak Farsi, Spanish, and Tagalog. Effective communication is a big part of the exceptional customer service we provide our clients.
We are available 24/7 for a phone consultation and if you are not able to visit our office, we are amenable to meet you at your convenience.
Contact our law firm at (866) 500-7070 for a free consultation and learn more about how we can help you with your employment claim.
What is Severance Pay?
California is an at-will employment state, which means that either party (employer or employee) can terminate the employment at any time, for any reason, or for no reason at all. Sometimes referred to as termination or separation pay, severance pay refers to the compensation made by an employer to a former employee. An employer can offer an employee to compensate an employee for immediate losses suffered from losing his or her job. The compensation is made when the employer terminates the employee’s employment.
Additionally, severance pay is generally reserved for employees that have worked with the employer for a certain amount of time. Employees who may be eligible for or entitled to severance pay include:
- Employees with employment contracts which clearly states that an employer must pay severance should the contract be terminated. Some contracts even include the amount of severance pay an employee is entitled to upon
- Employees who were terminated as part of a mass layoff. Under the Worker Adjustment and Retraining Notification (WARN) Act, employers are required to give a 60-day notice to the affected employees before a plant closing or mass layoff. The advance notice gives employees and their families time to transition and adjust to the potential loss of work, time to seek another job, and time to gain new skills and training to successfully compete in the job market. The WARN Act requires an employer to provide severance pay which includes salary and benefits.
Employers are not required by law to provide severance pay upon firing or laying off an employee. They’re also not required to provide severance pay if an employee resigns. However, some employers choose to give former employees severance pay in exchange for the employee’s agreement not to sue.
Typically, details of the severance pay will be included in a severance agreement. A severance agreement is a legally binding agreement between an employer and employee which specifies the terms of an employee’s separation. Since severance agreements are legally-binding, the language can be tricky or confusing to understand. It will generally contain several provisions that can affect your legal rights. The contents of a severance agreement may vary depending on an employee’s specific situation, but some of the most common and important sections include:
- Severance pay
- A release by the employee of any and all claims against their employer
- Continuation or extension of health care benefits
- Non-solicitation or non-compete requirements
- No rehire issues
- Eligibility for unemployment
While it’s important to completely understand each of these sections, it’s especially important to be aware of the release section. When an employer offers a severance agreement to an employee, it’s typically so the employee will sign a release of all their claims against that employer. When you sign a release, you may be giving up important employment rights. If you have been offered a severance agreement, contact a severance package lawyer as soon as possible. An experienced severance package lawyer can review your case, help you explore your options, and guide you through the appropriate steps as you terminate employment.
Why Do Employers Offer Severance Packages?
Generally, employers are not required to offer severance packages to departing employees. However, there are several reasons why an employer might offer severance packages to employees including:
The contract requires the company to provide a severance package.
Sometimes, an employer will offer a departing employee a severance package because they’re required to do so by the terms of the employment contract. Generally, this is a special benefit that is only provided to high level C-suite executives such as CEOs (Chief Executive Officers), COOs (Chief Operating Officers), CFOs (Chief Financial Officers), or CMOs (Chief Marketing Officers). Employers may offer severance packages to C-level executives for several reasons such as attempting to recruit the candidate from their current lucrative job. Some job offers may also require a job candidate to relocate to a new location. If the new position doesn’t work out, the pre-negotiated severance package ensures the candidate will still be compensated (to some degree) for leaving their old job and relocating to a new location. Essentially, some employers may provide severance packages to entice job candidates to accept their job offer.
The employer wants to sever ties with you in a clean manner.
One of the most common reasons why an employer would offer an employee a severance package is because they want a clean break. In other words, an employer wants to end things with an employee permanently without having to worry about any legal consequences in the future. For example, employees who have been wrongfully terminated, experienced wage theft, or harassed can wait up to four years to sue their former employer. When an employer offers an employee a severance agreement, they will most likely ask the employee to give up their right to seek any legal claim against them. While most employees leave their old jobs without looking back, an employer can be sure they have severed ties completely with a former employee with a severance package.
The employer wants you to sign a non-compete agreement.
Generally, non-compete (sometimes referred to as competition agreements or non-competes) are not enforceable in Los Angeles or anywhere in California. A non-compete agreement is a contract restricting a person’s ability to compete with a business, typically after termination of the relationship with that business. However, employers have found ways to include these agreements in a way that prevents former employees from competing against them in the future.
The employer wants to resolve any potential legal claims.
One of the most important reasons employers offer departing employees a severance package is to resolve any potential legal claims they might have against the company. By offering a severance package, the employer can avoid any potentially long and costly lawsuits.
What Is in a Typical Severance Agreement?
A severance agreement is a legally binding contract between you and the employer. While there are no two severance agreements that are exactly alike, they typically include a general release of claims, confidentiality agreement, and non-disparagement agreement.
General Release of Claims
This is usually longest section of the severance agreement. This section will include details about you giving up your right to sue your employer for all legal claims you may have against them, such as:
- Unpaid wages or minimum wage, overtime, commissions, and bonuses
- Missed rest or meal breaks
- Unreimbursed work-related expenses
- Disability, race, age, religion, sex, or any other forms of discrimination
- Harassment including sexual harassment
- Wrongful termination
Even though a severance agreement may require you to release all legal claims against your employer, you may still legally claim for:
- Unpaid wages which include unpaid minimum wage and overtime pay.
- Your right to report a criminal activity such as whistleblowing.
- Your right to work for another company (non-compete agreement).
To prevent other employees from knowing how much severance an employer pays you, they will require you to sign a confidentiality agreement as part of the severance agreement. Some confidentiality agreements are limited to only keeping the amount and language confidential. However, other confidentially agreements are more comprehensive and prohibit you from revealing details of the agreement including the terms, amount, existence, and negotiations leading to your severance agreement with anyone including your friends or family members.
To protect their reputation, employers do not want to have former employees sharing, writing, posting, or communicating anything negative about them– especially online or on social media. Negative reviews on Glassdoor, LinkedIn, Yelp, or anywhere else online can easily hurt an employer’s brand. As a result, the employer might have difficulty attracting new talent or even keeping current employees.
This is the reason why most employers will include a non-disparagement agreement section to the severance agreement. This clause prohibits an employee from disparaging or negatively criticizing the company, its products, services, or employees. Similar to confidentiality agreements, non-disparagement agreement can be drafted broadly or narrowly. The employee should be careful with broadly drafted non-disparagement agreement because the details of what you can or cannot or say can be unclear.
Even though every severance agreement is unique, at the minimum, it should include the following:
- Severance pay terms
- Confidentiality agreement
- General release of claims and covenant not to sue
- Vacation payment terms
- Return of property (if applicable)
- Unemployment information
- Consolidated Omnibus Budget Reconciliation Act (COBRA) information
Most employees will prioritize the money part of their severance package. Generally, California severance pay is based on terms of service such as:
- Rights from a 401(k), profit sharing, or pension account
- Commissions, bonuses, and deferred compensation payouts
- Stock option statement with an exercise schedule
- Restricted stock and acceleration
- Unreimbursed business expenses (this is frequently part of the release process and it is important that you know when the forms are due)
California law allows employers to include certain waivers in a severance agreement. An employer can lawfully provide a departing employee with a certain amount of money in exchange for the employee agreeing to certain conditions such as:
- Waiving their ability of file an employment lawsuit for wrongful termination.
- Waiving their ability to file a lawsuit for various forms of employment discrimination such as harassment.
- Waiving any known or unknown claims, as long as the severance agreement clearly states that the employee is waiving their right to file a lawsuit for unknown claims.
- Non-disparagement provision that states the employee will not disparage or say anything negative about the employer after they have ended their working relationship with the employer.
- Confidentiality agreement with the employee to keep the terms of the severance agreement private and to not share information about it with anyone else.
- Employee agrees to keep an employer’s trade secrets.
California employees should know that Government Code section 12964.5 requires employers offering severance agreements to advise departing employees to consult with legal counsel. Employers are also required to provide a reasonable amount of time (no less than five days) for an employee to do so. Employees have the right to sign a severance agreement in less than five days as long as they do so voluntarily and knowingly; without force or a threat by the employer to withdraw the offer in less than five days.
If you have been offered a severance agreement, don’t get pressured by your employer to accept, and sign a severance package right away. Contact a severance package attorney who can help review your severance agreement. An experienced attorney can review the circumstances of your resignation or termination and help you understand if you have any legal claims that might enable you to ask for a higher amount in your severance compensation package.
Should I Have a Lawyer Help with Severance Pay Negotiations
If you want to maximize your opportunity for getting the best severance package, consider hiring an experienced severance lawyer to help with your severance pay negotiations. A lawyer can review your severance package including:
- Severance pay terms – Ask for more pay, especially if you are being laid off because of an acquisition or merger. If you are receiving a continuation of salary in lieu of severance pay, ask for the continuation even upon death or disability. Make sure there are no mitigations or offsets if your employer plans to pay you in installments. Double-check and ensure that any unpaid bonuses are included.
- General release of liability – One of the most important parts of the severance agreement is the general release of liability section. It is often the longest part of the agreement and the entire release may be negotiable. Since you are giving up all known and unknown claims against your employer, you want to make sure you are fully aware of all your rights. It is a good idea to have an employment attorney review this document so you thoroughly understand the terms of the release.
- Non-disparagement – Severance packages typically include a non-disparagement section that prohibits departing employees from writing or making any negative or disparaging remarks about the employer. However, this clause can be mutual which means that you can negotiate to make sure that your employer also cannot make any disparaging remarks about you.
- Non-compete agreements – Although non-compete agreements are unlawful and unenforceable in California, some employers still include them in a severance agreement. If you see one, ask them to remove it.
- Confidentiality – Most severance packages are confidential which means you can’t disclose the contents or even the existence of one to anyone. However, you can negotiate for exceptions such as family members, attorneys, financial advisors, the government, and tax authorities.
- Transitional agreements – It’s common to include transitional agreements in a severance package. These agreements require the negotiation of various terms including confidentiality obligations, compensation, hours per month or week, length of agreement, dispute resolution processes, services to be provided, and solicitation of employee restrictions.
- Cooperation clause – Severance packages often include a cooperation clause, which ensures the departing employee cooperates with the employer should litigations or investigations come up. You can negotiate your severance so that your cooperation is limited to only your period of employment and scope of work. Make sure the clause states that your cooperation should not interfere with future employment and that you will get reimbursed for any travel-related expenses. Request that the employer also reimburse you for any reasonable out-of-pocket fees and to pay you at an hourly rate for any time spent.
- References – As you’re applying for a new job, potential employers may contact your previous employer for a reference or recommendation. As part of your severance, you can negotiate a standard agreement for your former employer to provide a positive statement or reference.
- COBRA information (medical benefits) – As a California employee, you’re entitled to medical and or dental coverage for up to 18 months after a job termination. If you are disabled, you’re entitled to coverage for up to 29 months. To save money, you can request that a taxable lump sum payment is made out directly to you instead of having your employer pay the insurance policy. If they agree to this, you can switch to a more affordable plan.
- Outplacement assistance – Outplacement is a common component of a severance agreement that is intended to help employees find work after a job loss or layoff. These services are contracted by an employer who is laying off employees. You can even ask for cash to hire your own outplacement firm.
- Company property – As part of your severance, you can negotiate to keep company property such as a laptop or cell phone. Employers who agree will typically require an employee to erase any company data on the devices first.
- Legal fees –You may be able to negotiate to get your legal fees covered while getting your severance agreement reviewed.
Keep in mind that almost anything can be negotiated within your California severance package. An employment lawyer experienced with negotiating severance packages will also know the kind of information that is important to emphasize and highlight. Additional items that an experienced lawyer can help you with may include:
- Aim to understand your goals (financial or professional) to better negotiate your severance package.
- Answer any questions you might have about your severance agreement.
- Review the areas of leverage you might have in negotiating your severance.
- Advise you on how to maximize your severance by guiding you on how to ask, what to ask, and how to respond to any objections from your employer.
- Negotiate directly with your employer on your behalf.
If you do not have extensive severance pay negotiation experience, it is unlikely that you will know exactly what to do to maximize your severance package. Additionally, unless you are a lawyer, you might not be able to accurately evaluate the value of any potential legal claims you could have against your employer. Often, this is the source of the greatest leverage an employee has when negotiating a severance agreement. A lawyer can review your employment situation and help you understand the full value of your legal claims.
Severance Package Policy
Some of the largest companies in the world are based in California. Typically, these companies will have formal severance package policies. If you work for a large corporation or for an employer with a formal severance policy, you should review it as closely as possible.
If your company has a formal severance policy, it usually addresses the following items:
- Purpose – This is an outline of the purpose of the severance agreement. Many times, it highlights help offered to departing employees as they look for a new job.
- Conditions – This section will include details about what an employee is required to do to qualify for and to receive a severance package. It might include items such as involuntary layoffs, downsizing, or terminations as requirements to qualify. Conditions that might not qualify such as involuntary termination with cause (for example, getting fired for a specific reason) may also be addressed in this section.
- Severance pay calculation – An employer can decide how severance pay is calculated. Policies will outline the severance pay calculation and include details about where the payments will come from such as unused vacation time or weeks of employment.
- How severance is paid – How your severance is paid can affect your unemployment benefits, so it is important to understand how your employer handles your severance. Are you getting regular severance payments or a lump sum? Make sure you fully understand the terms of your severance pay before you sign anything.
- Groups that qualify – Even if an employer offers a severance package, it doesn’t necessarily mean all employees will qualify for it. Additionally, an employer does not have to offer a severance to all employees. Sometimes, severance packages are reserved for certain workers. For example, an employer can have a policy stating that only salaried employees qualify for a severance package while hourly employees may not qualify.
- Documents – Many employers will require an employee to sign a legal release before the severance will be paid.
- Employer’s right to modify severance agreements – To keep themselves protected, an employer will typically maintain the exclusive right to end or amend a severance policy. Sometimes, there may also be stipulations. For example, if a company is sold or merges, an employee might not receive their severance pay.
You can usually find information about severance package policy in your employee handbook. If you don’t have one, request a copy from your human resources department. It is a good idea to review and understand your employer’s severance policies before you need it.
How Much is a Typical Severance Package?
Employees presented with a severance package may wonder about the typical severance pay amount. After all, financial compensation is one of the most important parts of your severance package. However, each severance package is unique and the amount you will receive depends on various factors. Many California employers will offer between one and three weeks of an employee’s current pay for each year they have been employed with the company.
Keep in mind that severance pay may vary depending on the size of your company, industry you work in, your length of employment, stage of your company (for example, start-up, small business, or large established corporation), your position, terms your employer is requesting, and reasons for departure. An experienced Los Angeles employment attorney will be able to review your situation and assess whether your employer has provided you with a fair severance package.
How to Calculate Severance Pay?
Severance pay may vary depending on your salary and the terms of your employment. One of the most typical ways to calculate severance pay is to multiply your weekly rate by the number of years you have been employed with the company.
For example, let’s say you have worked at a company for 10 years and make $75,000/year or $1442/week. Typically, you would be eligible for $14,423 in severance pay.
Common Benefits Included in Severance Packages
Many people mistakenly believe that severance packages only include salary. While salary is included, there are various other types of pay and benefits that can be negotiated into a severance package.
Healthcare in Severance Agreements
One of the most common benefits included in severance packages is continuation of health coverage. COBRA requires most California employers with group health insurance plans to offer departing employees an opportunity to continue their health coverage under the employer’s plan after they have been laid off or terminated. Employees should be able to access their health insurance plan for up to 18 months after leaving their former job. Once you have been terminated from your job and decide to continue your health coverage under COBRA, you’re responsible for paying the full insurance premium (both the employer and employee portion). As part of your severance, employers will sometimes include an amount to cover reimbursement of the employer’s portion of the premium for a specific period of time. Most employees do not continue health coverage under COBRA because it can be very expensive. If a spouse has a better or more cost-effective health insurance plan, that might be a better option. If you do not want COBRA coverage, you can negotiate to cash-out the reimbursement amount and add it to your severance pay.
Employee Stocks and Options in Severance Packages
Some employers offer an Employee Stock Option Plan (ESOP). ESOP are provided as an incentive for employees to remain with a company for a long period of time. When an employee leaves the company, they must give up their shares but can potentially sell it back to the employer as part of their severance package.
Your separation date shouldn’t be viewed as just a formality. This date is important because it can affect the equity and stock options you have with your employer.
Many companies grant employees restricted stock units (RSUs) or stock options. RSUs or stock options usually have a vesting period based on a vesting schedule detailed in your job offer letter. Typically, the vesting period happens over a four-year period with the first 25% vested after the first year of employment. The remaining equity is vested on a pro rata monthly or quarterly basis.
If your separation date happens before the next vesting period, you’re not entitled to the unvested RSUs or stock options for work done before the vesting date. For example, if an employee is scheduled to vest 1,000 RSUs on November 1 but is terminated on October 25 for poor performance, the employee would forfeit any right to the RSUs. In this situation, since the employee was not employed on the date of his vesting, they are not entitled to a portion of the unvested RSUs.
However, there is an exception. If an employer terminates you on the eve of your vesting date to prevent your equity from vesting, you could file an employment lawsuit against the company for breach of covenant of good faith and fair dealing.
Generally, every contract contains an implied duty of good faith and fair dealing which requires that neither party will do anything that will injure or destroy the right of the other party to receive benefits of the contract.
The separation date can also affect your ability to exercise any vested employee stock options. An employee stock option is the right to buy or exercise a certain number of shares of company stock given to you by your employer. During your employment, you might have vested stock options. While RSUs gives you immediate stock in the company once they’re vested, an option gives you the right to buy stock at a specific exercise price which is usually below market value.
However, once you have separated from the company, the time for exercising your options is shortened. Typically, you will only have 90 days from the date of separation to exercise your options. Check with your employer’s policy for more details. Some employers have stricter or shorter timelines. If you fail to exercise your options within the required timeframe, the options will expire and you will no longer have the right to buy stock at the exercise price.
Other Common Severance Package Benefits
- Vacation time or sick leave – Each state law varies regarding how vacation and sick pay must be paid out in a severance package. California employees who have been terminated or laid off and still have unused sick time must be compensated for it in their severance package.
- Pension benefits – If an employee is old enough to retire early, a pension plan can be negotiated into a severance package. Some companies allow employees to retire at the age of 55. For more details, refer to your employee handbook or employment contract. If you don’t have one, request a copy from your human resources department.
- Employment assistance – Employers may offer assistance to help departing employees find a new job. This benefit can help an employee find a job quickly and avoid having to file for unemployment benefits. An employer can help in several ways such as providing referrals to future employers, letters of recommendations, or resume development.
Factors that Affect Severance Pay
There are numerous factors that affect the amount of the or the benefits you could receive as part of your severance pay. Some of the most common ones include:
- The circumstances surrounding your termination.
- Your length of employment with the company.
- Your seniority level at the company.
- The profitability, size, and stage of the company.
- The amount of time required for you to find employment without suffering financial hardship.
Although the amount of severance pay your employer gives you may be non-negotiable, employees can negotiate for other non-monetary benefits such as continuation of health benefits (medical and dental), a positive job reference letter, funding for education, and retention for certain company property including a laptop or cell phone.
Deadlines for Severance Pay
The deadline to sign and accept your severance agreement will vary depending on your circumstances and employer. In California, employers must give an employee at least five days to consider a severance agreement. However, an employee may sign and accept the severance sooner than five days if he or she wishes to do so voluntarily and without force from the employer. A California employment lawyer might be able to extend your deadline to sign and accept a severance agreement.
Severance Pay Disputes
It’s common for employers to give employees a lowball offer and hope they will quickly accept the severance and move on. Even worse, mistakes happen and terminated or laid-off workers end up not receiving their severance check.
There are several types of severance pay disputes including duress, undue influence, and fraud. If your employer has breached a contract, then you may have grounds for an employment claim. Severance pay disputes can range from minor disputes to major company-wide violations that affect many employees.
Some common severance pay disputes include:
- Disputes over the amount of severance pay, types of benefits, or other severance package terms.
- Issues with non-payment of severance pay or wrongful withholding of benefits which were promised to the employee.
- Unlawful discrimination against an employee based on race, age, sex, national origin, religion, or other protected class.
- Conflict involving misrepresentation or fraud in the severance package. For example, getting tricked into signing and accepting a severance offer that contained different terms than the ones discussed during negotiations.
- Other various conflicts.
Severance pay disputes are often complicated. They typically require the knowledge and skills of an experienced employment attorney to resolve the issues.
Severance Pay and Wrongful Termination
To avoid a lawsuit, companies will require employees to sign a severance pay agreement along with release forms. These legal documents will require employees to sign off their legal right to sue the employer, work for a competitor, and may even prevent them from collecting unemployment benefits.
It’s important to keep in mind that you should never sign and accept a severance agreement if you do not fully understand the terms of the contract. You might be giving up your rights without knowing it. Many employers take advantages of employees by hoping they don’t take the time to properly review and negotiate a severance package at the time of termination. A wrongful termination happens when an employee gets fired under unlawful circumstances. Figuring out why you were terminated is important because it can give you more leverage to negotiate for a better severance package.
For example, if you are part of a protected class, you need to make sure that you were not illegally terminated. In California, protected classes include age (40 and older), race, color, religion, sex (including pregnancy, childbirth, and related medical conditions), disability, and national origin.
Employers are also prohibited from firing or demoting an employee for the following reasons:
- Making a complaint about sexual harassment
- Making a complaint or report about not receiving overtime pay
- Taking family medical leave
- Having a serious illness
- Caring for sick family members
- Being pregnant
- Serving jury duty
If you think you might have been wrongfully terminated, contact an employment attorney at Mesriani Law Group immediately. Our attorneys will review your severance package and help you develop a plan to negotiate for the best terms possible.
Practical Items to Review About Severance Packages
When reviewing your severance package, a California employment lawyer will ask you and your employer how other employees were treated in similar circumstances. A lawyer will review the following:
- All relevant employment contacts.
- Terms of the contact that can be negotiated.
- Tax consequences. Typically, severance pay is considered income and that means the employee will need to pay local, state, and federal income taxes on the severance pay amount. A knowledgeable severance pay attorney can review and determine whether the agreement can be structured to reduce the amount of taxable income.
Instead of providing one lump sum payment, some employers will make payouts or provide the severance pay in installments. If this is the case, an employment lawyer will review the following:
- How the payouts will affect your ability to seek unemployment compensation.
- How the payouts will affect whether you can keep your old health insurance, switch to COBRA, or obtain a new policy.
- Whether there is a risk that the employer may go out of business before your severance package is paid in full.
An attorney will explain the rights you will be giving up by signing the release. During this time, many employees learn that they have rights they never even knew about. It’s important to note that once you sign a release, it’s very challenging to cancel or change the terms of the agreement even if duress, undue influence, or fraud was used to pressure you to sign.
What Can’t Go in Severance Agreements
Under California law, employers are prohibited from including certain terms or waivers in a severance agreement (even if they are legal in other states). Examples of terms that are cannot be included in a California severance agreement include:
- Employee waiver of wage and hour law claims
- Employee waiver of the right to report a criminal activity at work
- Employee waiver of age discrimination claims
- Confidentiality agreement regarding sexual harassment at work
- Non-compete clause or any other agreement which restricts an employee’s ability to work for a former or current competitor of the employer
- No re-hire clause or provision stating that an employee can’t obtain future employment with the employer or any businesses affiliated with the employer
The above list includes just some items that can’t be included a California severance agreement. For more information about the terms or waivers that can or can’t be included, speak with a California employment attorney today.
Sign-On Bonus Claw Backs
As part of their employee offer, some employers offer a sign-on bonus. However, some sign-on bonuses may come with a claw back clause which states that the bonus must be returned if the employee departs early from the company. Depending on the details of the offer, the employee might have to pay back the full amount or pro rata share of the sign-on bonus. For example, if your offer states that you have to return the full sign-on bonus if you leave the company before working there for one year, then you must return the full sign-on bonus. There can be potential significant tax consequences so employees should carefully consider the manner and the timing of the repayment obligation.
Release of Liability Forms
Most severance packages will typically include release of liability forms. Essentially, an employer will want an employee to sign a release waiving their legal rights. However, California employees may have certain rights that they should not waive including:
- The right to dispute a wrongful termination if it is discriminatory, a violation of a written contract or any other policies or laws.
- The right to file a claim against the employer for adverse or wrongful treatment. If an employee has a valid claim, he or she might be entitled to additional pay and benefits, punitive damages, statutory damages, and legal fees.
- The right to file a sexual assault or abuse claim.
- The right to file a discrimination claim based on age, race, sex, gender, pregnancy, disability, national origin, religion, or other factors.
- The right to file a claim for retaliation. If an employee was fired or treated adversely because they asked for workers’ compensation benefits, filed a False Claims Act case, or reported an employer’s unlawful behavior, they have the right to file an employment claim against the employer.
Additionally, a release might ask an employee to waive both known and unknown claims against the employer. By signing and releasing claims that are unknown at the time an employee signed the severance agreement, they will not be able to bring another lawsuit even if they become aware of a situation after the release has been signed. To avoid this situation, release of liability forms should be reviewed carefully with a California severance agreement lawyer before the employee signs it.
Non-Compete Agreements in Severance Packages
Generally, non-compete agreements are not enforceable in California. However, there are two exceptions. First, non-competes may be enforceable if you’re the owner-employee and sell all of your ownership interest. Your company can force you to sign a non-compete agreement that applies to a certain geographic area where the business is sold. The definition of an owner-employee applies to those who are:
- An owner of a capital stock of a corporation
- A member of a limited liability company (LLC)
- A partner of a limited partnership (LP) or limited liability partnership (LLP)
Additionally, you must own more than only stock in the company. Your ownership in the company must be one of the following:
- A capital stockholder in the case of a corporation
- A membership interested in the case of an LLC
- A partnership interest in the case of a partnership
The second exception is when there is a choice of law clause included in the severance agreement. The choice of law or governing law provision in a severance contract allows the parties to agree that another state’s laws can be used to interpret the agreement– even if they live in or if the agreement was signed in a different state. While most California employment contacts are subject to California state law, some companies with offices outside of California might want to have their employment contracts interpreted under a different state law which are more favorable to employers.
Typically, your employer can’t force you to agree to have your employment contract interpreted under another state’s law. However, you can agree to this if you’re being represented by a lawyer when you’re negotiating the terms of your severance package.
Workers’ Compensation & Severance Packages
In California, a severance agreement cannot affect your worker’s compensation benefits. For example, your employer can’t offer you severance pay in lieu of you filing for workers’ compensation benefits. If you’re involved in a workers’ compensation claim or thinking about filing one, your employer cannot force you to waive away your rights to file a claim.
Can I Sue My Employer If I Didn’t Receive Severance Pay?
Although there are no legal requirements for California employers to provide severance pay, employees should refer to their employer’s policies and employment contracts regarding severance packages. If your employer has a severance pay policy or if your employer offer includes severance, have a California employment attorney review the terms of your agreement. An attorney can determine whether a filing a lawsuit is beneficial if you did not receive the severance pay you were promised. Additionally, an attorney can negotiate for a better severance package if you’re not provided with a fair offer.
If you received your severance pay without signing a release, you’re free to sue your employer. But if you signed a release then you will have to show that the release is invalid in order to sue your employer. Generally, this is a very difficult since the courts typically uphold these contracts.
If your employer offers you a severance that includes a general release, it is a good idea to consult with an employment attorney before you sign the agreement. Instead of signing the release and trying to argue later that it’s invalid, it’s better to negotiate a better severance up front.
Contact Mesriani Law Group Today
If you have been laid off or terminated, you don’t have to go through these difficult times alone. The severance package lawyers at Mesriani Law Group will help you negotiate favorable terms with your former employer so you are fairly compensated for the time you put in with your company. Losing a job can be financially, emotionally, and mentally challenging. Hiring an experienced employment attorney can help relieve some of your challenges and ensure you obtain the best severance package as you move forward to the next chapter of your career.
For a free consultation, contact our law firm today at (866) 500-7070
Contact Us Today at (866) 500-7070 or Message Us Online to Schedule a Free Consultation
Severance Package FAQs
If you want to maximize your opportunity for a better severance package, you should consider hiring a lawyer. Having a attorney client relationship is beneficial as your lawyer can evaluate your employment history, review your severance agreement, and help negotiate your severance package. Additionally, most severance agreements require you to waive certain rights and any potential legal claims against the company. Often, this is the greatest source of leverage when negotiating your severance. A lawyer can help you understand the rights you may be giving up and the full value of your claims.
Some attorneys charge an hourly fee to review severance packages while others charge a flat fee. Additionally, other attorneys will retain clients on a contingency fee basis, where the fee is payable to the law firm only if they have obtained favorable results.
Severance packages are unique to the employee and the amount you will receive depends on various factors. Most California employers will offer between one and three weeks of an employee’s current pay for each year they have been employed with the company. Keep in mind that severance pay may vary depending on the size of your company, industry you work in, your length of employment, stage of your company (for example, start-up, small business, or large established corporation), your position, terms your employer is requesting, and reasons for departure.
Although there are no legal requirements for California employers to provide severance pay, employees should refer to their employer’s policies and employment contracts regarding severance packages. If your employer has a severance pay policy or if your employer offer includes severance, have a California employment attorney review the terms of your agreement. If your employer violated any state or federal laws, then you have the right to sue.
Absolutely No Fee Unless We Win Your Case
Mesriani Law Group has over two decades of experience in protecting victims of personal injury accidents as well as employment and labor law violations in California.
Through our wealth of experience, we understand that the main reason why victims of accidents or of unjust treatment by employers are hesitant to file cases or claim damages against the parties at fault, and this is because of the high legal fees.
In order to resolve this matter and help more people get the best compensation they deserve against the people who caused their injuries, pain and suffering and losses, we decided to offer a No Win No Fee guarantee to all our clients. This means that you don’t have to pay us anything for our top legal services, regardless of the complexities of your claims, if we are not able to provide you with the justice you deserve.
We offer this because we are confident that our experience, expertise and dedication will always translate in getting the maximum compensation you deserve at the swiftest possible time. Call our top personal injury attorneys right away for your personal injury accidents or our best employment and labor law attorneys in California for any employee related concerns and we’ll assure you of nothing but the best legal service and personalized client care you deserve.
What Our Clients Have To Say
“I cannot emphasize enough the level of their professionalism and effectiveness. It was great working with Rodney and the whole team at the Mesriani Law Group. The compensation they got me was more than I expected. I highly recommend them. With the Mesriani Law Group you’ll be in the right hands when you have an accident. They’ll take care of your case like no one else and get the maximum that you deserve.“
“After contacting many different lawyers and law firms to discuss my legal issue, I was lucky enough to come across Mesriani Law Group. They took the time to listen to all the details of my case patiently & kept me updated through out the process on a regular basis. His team was very responsive and accessible both via email and phone. Rodney Mesriani and his team did a fantastic job. Let me add that Cory, Stephan and Brandon were very helpful along the way.
Highly recommend this law firm.“
“My insurance gave me the run around for a horrible car accident I was involved in. I was getting so frustrated until i contacted Rodney and his team. Not only was his staff super professional, they actually cared and followed up with me. My case has been settled and I couldn’t be happier. Hopefully I don’t get into any more accidents but if I do, I know where to go. Thanks for having my back Rodney!!!“