A Brief Guide to California Severance Agreements

Letting an employee go is a stressful situation. Perhaps your needs have changed, and it’s time to go in a new direction. Perhaps you have run into a problem with an employee and firing them is the only option. Although you might be nervous and worried about how the employee will react, there is a way to make this process a little less painful. When the time comes to let an employee go, you can offer what is called a severance package or a severance agreement.

A severance agreement is a contract wherein the employer agrees to give severance pay to the employee for a certain amount of time once they have been let go. They are not required by law unless previously agreed to in an employment contract, and the agreement will be governed under California’s contract laws. So, what are the basics? What can and cannot be included? Let’s discuss.

What is their purpose?

In addition to providing your employees some peace of mind and a financial cushion while they figure out next steps, severance agreements benefit employers in several ways. This is because the law provides employees the right to sue their employers for many different reasons. From wrongful termination to alleged violations of discrimination policies, there’s a lot you have to be aware of when letting an employee go. Fortunately, that’s where severance agreements come in. Severance agreements allow employers to limit the types of lawsuits employees can bring by obtaining an agreement that they will release any existing claims they might have against you. In effect, it’s a bit like buying their cooperation. So, unless you actually did do something wrong, a severance agreement can protect you from any frivolous employee lawsuits.

What’s valid and what’s not?

Generally, a severance agreement is valid and will hold up in court so long as it was entered into voluntarily and the terms within are legally sound. There are many rights that employees can waive, such as the ability to sue for wrongful termination based on race, sexual orientation, gender, and harassment, or for the ability to discuss trade secrets and other confidential information. However, there are also many rights that employees cannot waive in a severance agreement. For instance, an employee will never lose the ability to report crimes or to bring alleged violations under California’s employment laws for things like overtime pay or receiving minimum wage.

Another common right employees can’t waive is the right to go work for one of your competitors because of a noncompete clause. This is a prime example of what will not hold up under legal scrutiny as the California courts have consistently held such clauses to be an unenforceable, invalid restriction on an employee’s right to gainful employment.

Speak with a business law attorney today.

At Integrated General Counsel, we know how hard it can be to make decisions about your employees. You care about them and want to make sure that nothing is done that might hurt either of you in the long run. Having a severance policy in place is important for making sure you can handle difficult situations in the best way possible should they ever arise. If you have questions about how to create a severance package for your employees, contact us today.

Share this on...Share on FacebookTweet about this on TwitterShare on LinkedInShare on Google+Email this to someone

Written by Integrated General Counsel

Our focus includes handling a variety of corporate matters and also includes litigation in state and federal courts. Our current practice includes providing transactional services and representing a variety of small and medium-sized companies as their outsourced general counsel.