Lately, our Orange County Law Firm has been receiving calls regarding this issue. Employee reductions and terminations have been an unfortunate result of the current economic downturn. In California, there is no requirement in the Fair Labor Standards Act to provide Severance Pay. However, "Severance Pay" is often granted to employees upon termination of their employment. A Severance Agreement is a contract, or legal agreement between an employer and an employee that specifies the terms of an employment termination, such as a layoff. Often times this agreement is called a "Separation" or "termination" agreement or "Separation Agreement General Release and Covenant Not to Sue." The consideration offered for the waiver of the right to sue cannot simply be a pension benefit or payment for earned "vacation pay" or sick leave to which the employee is already entitled but, rather, must be something of value in addition to any of the employee's existing entitlements.
To minimize the risk of potential litigation, many employers offer departing employees money or benefits in exchange for a release (or "waiver") of liability for all claims connected with the employment relationship, including discrimination claims under the civil rights laws enforced by the Equal Employment Opportunity Commission (EEOC) -- the Age Discrimination in Employment Act (ADEA), Title VII, the Americans with Disabilities Act (ADA), and the Equal Pay Act (EPA). While it is common for senior-level executives to negotiate severance provisions when initially hired, other employees typically are offered severance agreements and asked to sign a waiver at the time of termination.
An example of consideration would be a lump sum payment of a percentage of the employee's annual salary or periodic payments of the employee's salary for a specified period of time after termination. The employee's signature and retention of the consideration generally indicates acceptance of the terms of the agreement. If an employer decides to offer the employee a severance package, quite often the employer will have the employee sign a release, that's an agreement not to sue the employer in exchange for receiving certain benefits. The employer must give the employee a certain period of time to review the release, allow them to revoke the agreement for a limited time after they sign, and advise them in writing to consult with an attorney. If you have been presented with a written severance agreement or release of claims and you would like to discuss your rights and obligations under it please contact us.
