What You Need to Know About California Severance Agreements

Attorney signing agreement with client

What You Need to Know About California Severance Agreements

When a company and an employee part ways, the employee often walks away with a severance package, usually a figure based on the number of years the employee spent working at the company, along with certain benefits such as access to a health insurance package. In California, a severance agreement is also known as California termination and separation pay, and it serves as a contract between an employer and an employee to mark the end of the employer-employee relationship. Severance packages are most commonly offered during layoffs, if a position is suddenly eliminated, or if there is a mutual agreement between the company and an employee to part ways.

Employer rights

Severance agreements are legally binding and are most often included as a departure package as a way to protect a business against future litigation from an employee. The severance package acts as a release from all claims. A severance package does not prevent an employee from being eligible for unemployment insurance benefits unless misconduct is the reason behind the separation between the employer and employee. An employee may also become ineligible for unemployment if misconduct is the reason for departure.

In this case, a severance package would be the only funds an employer would pay, and again, if misconduct is the reason for departure, a severance package may also be off the table along with unemployment benefits. Severance agreements also often include preventing an employee from revealing trade secrets, but they can’t include non-compete agreements, which would prevent an employee from getting another job in the same industry. They also can’t prevent an employee from reporting a crime, they can’t be signed before owed wages have been paid, and the can’t be signed under duress.

Employee rights

If a severance package is being offered to prevent future litigation, those terms should be made clear in the agreement, so an employee understands what rights he or she is signing away by accepting severance. If an employee and an employer are parting ways because of sexual harassment or any other form of harassment, discrimination claims, wrongful termination or any other reason that the employee feels is detrimental to his or her career, he or she has the right to consult with an attorney before signing and accepting the severance package, and should, because in many of the instances mentioned, there could be grounds for a lawsuit.

A Business Attorney Can Protect Your Rights

An experienced attorney who specializes in severance packages such as Brandon Fernald of Fernald Law Group can help you draft a severance agreement that will protect both parties if the employment relationship comes to an end. If you are drafting a severance package agreement or are debating whether it is in your best interest to sign a severance agreement based on certain workplace experiences, call our offices today for guidance.

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