If they have an employment agreement, certain executives or high-level employees may be contractually entitled to a severance payment. These employment contracts are negotiated prior to the start of employment and provide that the employee will receive a certain amount of money if the termination was without cause during a certain time period.
However, when an employee is not contractually entitled to severance, there is no law in California requiring that a private employer pay an employee severance when terminating an employee. This means that an employee can work loyally for a company for decades and then be terminated without any form of severance.
Even though California’s employment laws do not require severance, many Los Angeles and Pasadena employers properly view severance agreements as a good way to smooth a departing employee’s transition and buying security against any future lawsuits by the employee against the company or its officers.
The situation typically occurs when an executive or employee is terminated and is informed that he or she can receive certain benefits if the employee signs a severance agreement. Many employees facing the economic pressures associated with losing their jobs just sign the agreement without much thought.
The severance agreement the employee signs is usually includes a release of any and all known or even unknown claims the employee has or may have against the employer, including claims for wrongful termination, discrimination, retaliation, and harassment claims. In exchange, the employee generally receives a lump sum payment, or salary continuation, and/or payment for their medical insurance (COBRA payments).
Severance agreements also can provide for non-disparagement, which means the employee cannot say anything negative about his or her former employer.
Also, for employees age 40 or older, the Age Discrimination in Employment Act (ADEA) has specific provisions that must be included to validly waive a claim of age discrimination.
Certain types of claims, such as workers compensation claims for injuries on the job, cannot be released through a severance agreement. A severance agreement also cannot forbid an employee from participating in an investigation by the Equal Employment Opportunity Commission (EEOC), the Department of Fair Employment & Housing (DFEH), or other governmental authorities.
When presented with a severance agreement, the decision to sign or not to sign is often a difficult one for an employee to make. The best course of action is to take is to take a deep breath and consult an experienced employment lawyer about the situation. A skilled employment lawyer can ask pertinent questions to find out whether there may be an illegal motive at play for your termination, if there are any uncommon or unusual terms with a specific severance agreement, or if there is leverage to justify and negotiate a higher severance payment.
Some key issues to address is whether the termination was part of a larger reduction in force or restructuring, is the termination based on performance of role elimination, and what recently occurred that may have prompted the termination of the specific employee’s job (including any recent complaints made to managers/HR or medical leaves of absence).
Many times, an employer’s opening severance offer is not the employer’s best and final offer. Care should be taken to ensure that the employee is getting fair value for his or her signature on the release and giving up any wrongful termination or other claim the employee may have against the company.
From their offices located in Pasadena, Downtown Los Angeles, and Newport Beach, the employment law firm provides legal services exclusively to executives and employees throughout California, including Pasadena, Los Angeles, Orange County, Riverside, and San Bernardino.
This article was originally published in the online magazine Pasadena Now (on January 31, 2018).