Should I Accept My Employer’s Severance Package?

Employers often offer severance pay to employees that are fired or laid off in return for a waiver and release of any claims the employees may have against them. These offers are usually extended in the form of an agreement entitled “Severance Agreement,” “Separation Agreement,” or “Exit Agreement.” In this blog, I will collectively refer to these and other agreements whereby employees waive rights in exchange for severance pay as “severance agreements.”

Often severance agreements advise employees to consult with an attorney before signing and provide employees with 21 days to consider the agreement before signing and 7 days after signing to revoke the agreement. Such language is only required for an enforceable waiver of claims under the federal Age Discrimination in Employment Act, but employers often incorporate these terms into all of their severance agreements for ease of administration and/or to attempt to demonstrate that the waiver was made “knowingly and voluntarily” by employees.

Employees should understand that a properly drafted severance agreement is usually enforceable under California law and amounts to a waiver and release of most claims against their employers for, among other things, discrimination, harassment, retaliation and wrongful termination. Furthermore, severance agreements may contain “non-compete” clauses which can interfere with ex-employees’ ability to find new jobs. Accordingly, employees should consult with an attorney before signing severance agreements to determine if they are waiving valuable claims. Many employment lawyers, including as the Law Offices of David S. Levy, provide free consultations with employees to discuss the legal implications of signing severance agreements and to assist employees in negotiated enhanced severance packages.

Employers should understand that offering severance in exchange for a general release to an employee (or ex-employee) who has not made a claim against the employer may be admissible in court and evidence of, among other things, the employer’s improper motive for terminating the employee. Employers should consult with an employment attorney, like the Law Offices of David S. Levy, for advice to avoid this and other common pitfalls associated with severance agreements.

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