It’s Friday afternoon and, whether you saw it coming or not, your supervisor tells you it’s your last day. Often, your supervisor adds the “good news” of a severance agreement to soften the blow. Across the desk comes a multi-
page document with lots of paragraphs that look vaguely like a mortgage agreement. The severance pay and benefits part of the agreement may be your primary focus – and for good reason. You want some income “safety net” while you find another job. But the severance pay always comes with a “price” – i.e., what you “give” your employer to get that severance pay. Before you sign, make sure you know whether the severance deal your employer proposes is right for you.

  1. What legal claims might you be waiving and is the severance deal worth it?

Unless you have an automatic right to receive severance pay under a union or individual employment contract, a severance agreement allows an employer to “buy legal peace” with the employee being separated from employment. In other words, to get the severance pay/benefits, you must agree to release and waive any and all claims you may have related to your employment, even ones unknown to you at the time you sign. Should you?

If you have any reason to believe that your employer violated your employment rights during your employment or by terminating you, you should consult an attorney before signing the severance agreement/release.   For example, are you right in believing your employer may have violated the law? Are the claims provable and, if so, are they likely to be worth more than the severance pay or other benefits being offered? Will the time, effort and expense of legal action to pursue those claims be worth it compared with the certainty the severance deal offers you? If it’s a “close call,” can the terms of the proposed severance deal be improved upon to your satisfaction so that protracted and costly litigation can be avoided? Assuming your employer follows the law in giving you notice and proper time to decide whether to sign the deal, it will be enforceable against you. So know before you sign. 

  1. Is your employer asking too much from you in exchange for the severance pay or imposing unlawful restrictions on your right to pursue your occupation or career?

Certain claims cannot be waived.  An employer may not require you to waive your right to apply for Unemployment or Workers’ Compensation benefits. Open or pre-existing Workers’ Compensation Claims may only be settled with judicial approval.

Right to seek re-employment with terminating employer. Just this year, the federal appellate court covering California held that a severance agreement which bars an employee from seeking future employment with the terminating employer, or its subsidiaries, is unenforceable if this term constitutes an unlawful restraint on the employee’s ability to engage in his or her chosen profession.

Right to pursue occupation or career without unfair restraint. An employer is entitled to protect its “trade secrets” — such as information technology or customer lists — and the law prohibits a former employee from “soliciting” a former employer’s customers. But the law also prohibits employers from restraining a person’s right to pursue an occupation or profession by going to work for a competitor. An announcement about your new employment situation, disseminated by postcard or other means to your former employer’s customers or clients, does not constitute unfair competition or solicitation. But you may need help from an attorney to assure your former employer recognizes and respects your rights. 

  1. Have you received full payment for all monies due?

California’s Labor Code requires employers to pay a discharged employee all wages owed, including accrued vacation, immediately upon termination. “Wages” also include earned (prorated) bonuses, and commissions. With narrow exceptions, “sick leave” is not vested – an employee must use it or lose it. Be sure to check relevant offer letters, pay stubs and other employment records or employer handbooks to determine if you have received all compensation to which you are entitled.

A Final Cautionary Note About Your Employer’s Property

More often than not, employees come to possess work-related property such as customer lists, pricing or performance reports, lap tops, smart phones or other devices. With few exceptions, these materials belong to your employer and need to be returned upon separation. Make sure you verify (by pictures, an e-mail itemization or other means) what you returned, when and to whom. Even if you believe your employer has violated the law, do not engage in “self-help” remedies by copying or removing an employer’s property (e.g., electronic files). There are lawful means available later to access this evidence. Your use of a “self-help” remedy by taking property which belongs to your employer is never a good idea; it will only expose you to claims and remedies for theft, conversion, or unfair competition – and may diminish your credibility and the value of your legal claims.