Employment Law Severance Pay

QUICK READ & BOTTOM LINE: It's money well spent [maybe $100 to $500] to have an attorney review a severance and/or release agreement you are being asked to sign. Note: in the search for cases some lawyers review release agreements at no charge to you!

A lawyer needs to consider the issues I have listed on this page. A lawyer needs to explain the significance of your signing a release. A lawyer needs to explain your rights, duties and obligations under the agreement. And only a lawyer can explain what claims you may have and what you are giving up should you sign the release.

Remember, the employer had a lawyer prepare the release/severance agreement; so you too should have a lawyer examine your history with the Company to determine what claims you may have and what you are giving up should you sign the agreement. And best of all, the lawyer may be able to negotiate with the employer to obtain more severance pay for you!


Severance Pay / Release Agreements Issues and Insights
1. Many employees are not aware that California law does NOT require an employer to provide severance pay to a departing employee. (Note: if larger companies are going through mass layoffs, the federal WARN law acts as a "severance pay" of sorts for soon to be laid off employees. This is in the form of *advanced notice* of termination or layoff. Some employers choose to have employees laid off immediately and to provide pay in lieu of issuing WARN notices and having the employees continue to work during the WARN notice period.)
2. If an employer provides severance pay, pursuant to a written or oral policy, the policy or "program" is a contract between the employer and the employee. Such understandings, contracts or agreements may be subject to federal or state regulation; otherwise, general contract law and principles apply in interpreting or enforcing severance pay programs or agreements.
3. The trend in modern times is that most employers do NOT have set or guaranteed severance programs. In other words, employers typically do NOT give employees a handbook or memo that says, for example, for each month worked you receive X amount of severance pay.
4. Typically, employers now offer a fired employee, on an individual basis, severance pay in return for the fired employee agreeing to sign a release of all claims, known or unknown, that the employee may have against the employer. This is a fancy way of saying: in accepting the money specified in the release agreement, you agree to never, ever sue the employer for anything.
5. Release agreements are BINDING contracts and the Courts will enforce the terms.
6. Unless addressed in the release agreement, keep in mind that although the employee agrees to never pursue a case against the employer, the employer is NOT releasing any claims it might want to pursue against the former employee. For example, if six months post-termination the employer discovers you stole Company property, it may pursue you through any means available [such as a lawsuit or by contacting law enforcement]. The employer can go after the ex-employee because he or she did not sign a mutual release.
7. Because the release you signed was NOT a "mutual release," meaning both the employer and employee forgive each other on any claims or disputes, the employer had reserved the right to file any claims it may have, known or unknown at the time you sign the release and receive the severance pay. THE MOST COMMON RELEASE SIGNED IS ONE WHERE THE EMPLOYEE RELEASES THE EMPLOYER, BUT THE EMPLOYER DOES NOT RELEASE THE EMPLOYEE!
8. Severance and release agreements involve many issues of which most employees are not aware. Realistically, the departing employee understands one thing, he or she needs the money being offered for a signature on a release agreement. Most employees sign release agreements to get the money. Most employees do NOT seek the advice and counsel of an attorney BEFORE signing a release agreement.
9. In contrast, employers are keenly aware of the value in getting the employee to "sign off" on the release agreement. An employer typically has an attorney prepare or draft the agreement. Usually the attorney is aware of what to include and leave out in the document, this so the document favors the employer. Moreover, most company human resource personnel receive training on how to get employees to sign release agreements. Part of the training includes techniques such as:
	A) Putting the employee at ease through the entire review and signing process;
	B) Being especially friendly on follow-up calls asking the whereabouts of the signed agreement;
	C) Waving under the employee's nose, so to speak, the check he or she will receive if the release is signed;
	D) Making it appear that signing the release is merely a paperwork formality so the check can be handed over to the employee;
	E) Giving the employee a stack of paper to review, with the Release buried into the pile, knowing that the more the employee has to read, the more likely the employee will not notice or read the terms of the release agreement;
	F) Not reviewing nor explaining with the employee the meaning of the release/severance agreement's terms and conditions. Note: there is no law requiring an employer to go over the agreement with the employee. Pursuant to federal law for the release of certain claims only an opportunity to review the agreement is required for release of those claims.