Severance Package Agreement in California
In employment, there is no assurance that an employee stays to work for a certain company on a long-term basis. Due to economic reasons or due to circumstances that go against company policies, an employee may face termination. Whether it is in the form of a layoff or just a regular termination, it is truly an experience that is difficult to go through. To begin with, being no longer employed means having to start from the beginning again; finding work and upon doing so having to adjust again to a new working environment. Fortunately, any employee who undergoes this phase may be entitled to obtain from his or her former employer what is called a severance package.
Basically, it consists of pay and benefits which is afforded to an employee who was terminated, laid-off, or even resigned from the company. It generally covers additional pay based on his or her months or years of service with the company and on his or her unused vacation or sick leaves, as well as insurance benefits and bonus payments. It could also include retirement benefits if the employee involved is set to retire. Though it is not required under the law for employers to give severance packages to its soon-to-be former employees, they do so because of various reasons.
One of them is that a promise of a severance package may be included in the stipulations of an employment contract, regardless if it is oral or written in form. Another is that the same could also be given to an employee in accordance with an existing company policy or practice. However, probably the most obvious reason for employers handing out such is for the employee to waive off his or her legal rights.
To explain this in a simple manner, imagine an employee getting terminated from his job. Luckily for the employee, there is a stipulation in his employment contract that he has the chance to receive a severance pay. But then, his employer explains further that upon signing the papers that would formally give him the severance package, he is “releasing” or giving up any potential claims he may have against his employer. If the papers are signed, he cannot sue or take any other legal action against the employer. In this situation, the employer wins; it can successfully avoid facing any legal issues in the future. In exchange for the total amount of pay and benefits within the severance package, the employee is no longer entitled to file claims against the employer.
Although this is legal, employees who have been terminated, laid-off, or have decided to resign from their positions must always be conscious at what is at stake when entering into a severance package agreement. To begin with, there are employers and companies that utilize certain language in their agreements that would basically put themselves in the position wherein they can’t get sued, and that they could expect the signing party to waive off their rights to sue against them. If there’s coercion or pressure from the employers’ end, employees involved may have to think twice before signing on the dotted line.
Indeed, entering into such an agreement could be tricky. Yes, there’s pay and benefits in the severance package, but losing out on a chance to assert one’s rights may be possible if quick decisions prevail. Going back to the situation above, the employee may found only after signing the documents that his termination was found to be wrongful, and was based on his protected characteristic. Say he resigned from his position and he was offered a severance package but he knew that he resigned due to the hostile working environment. True enough, there should be careful consideration before waiving his rights to take legal action on such instances.
Any employee who is presented with a severance package must first understand what he or she may be receiving and what he or she may be losing in exchange. Consulting with an employment lawyer who specializes in cases of severance package agreement in California is the best way to do so in such a situation.