A severance package is an agreement between an employer and an employee that details the terms related to an employee’s departure from the organization. Severance agreements are common in many different industries and professions, including corporate roles, the tech industry, media and entertainment, and labor unions. These agreements will typically include what severance pay and benefits employees will be entitled to. But severance agreements often cover much more than just payment terms after an employee’s departure. Here are a few things to look out for if you are looking to work for a new employer that has a severance agreement.
Severance Pay and Benefits
One of the most important things that you want to look for in any severance package is the total amount offered. It may be based on tenure, role, or some other flat offer. There may also be a minimum period that you will have to work before being eligible to receive severance pay. You also want to clarify several other points with your potential employer.
- Inquire if severance pay will be made in installments or a lump sum.
- Inquire if any unused PTO or vacation time will be included in your severance package.
- Inquire how stock options, bonuses, or other forms of commission will be affected by your departure.
It is best to understand everything related to your pay upfront and to be on the same page as your employer. Before you sign any employment contract, you should understand what to expect if you leave. Now is the time to negotiate if there are one or more terms in your severance package that you are unhappy with.
Confidentiality and Non-Disparagement Agreements
As part of any severance package, employers will typically require that their employees do not speak negatively about them or their experience at the organization. If these stipulations appear in your agreement, ask questions about what these restrictions entail. Employees should consider negotiating that any non-disparagement clause is mutual and applies to the employer as well. Regardless of whatever agreement you sign, employees retain the right to disclose unlawful acts in the workplace under California’s Silenced No More Act.
Waiver of Claims and Release of Liability
Companies do not want to be sued by their employees for anything related to their position or termination. One of the ways that they accomplish this is by having employees sign a release and waiver of claims. A severance agreement can help companies avoid legal claims. By signing a severance agreement as you are leaving, you may unintentionally be signing away your right to pursue legal claims. However, certain rights cannot be waived through a severance agreement.
- You cannot sign away your right to receive workers’ compensation in the event that you are injured.
- You cannot sign away your right to report or participate in investigations of illegal conduct that your employer engaged in.
- You cannot sign away your right to speak about unlawful behavior that occurred in the workplace. This right was strengthened with the passage of California Senate Bill No. 331.
If you have experienced any type of misconduct in the workplace, it is important to carefully consider the terms and implications of any severance package you are being asked to sign. In these situations, most employees should at least consider speaking with an experienced employment law attorney.
Non-Compete Agreements
Be sure to look for any non-compete agreements or restrictive covenants within your severance package. As a general rule, noncompete agreements are prohibited under California Business and Professions Code Section 16600. Pursuant to the statute, “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” There are some situations where noncompete agreements may be enforceable, but these typically apply to business owners. They don’t apply to the agreements that business owners have with their employees.
Getting Legal Help With Employment Contracts
Whether you are looking to start a new job or negotiating the terms of your exit, it is important to understand all of the implications of a severance agreement. These agreements can impact your ability to pursue legal claims down the road. This may be particularly disadvantageous if you’ve been the victim of a wrongful termination or discrimination.
It’s always best to at least consult with an attorney if you have questions about your severance agreement. Our team of labor law attorneys at The Labor Champ can help you. We will do everything in our power to ensure that you are treated fairly as you pursue new work opportunities. Whether you just have legal questions or are wondering how an attorney might be able to help with your particular situation, we are here for you. Contact us anytime at 949-727-9300.
