Severance Review and Severance Negotiation

California Severance Agreement Review and Negotiation

Help! I Have Been Presented with a Severance Agreement

When your employment relationship is ending, whether due to a layoff, a mutual separation, or other circumstances, your employer may present you with a severance agreement (also known as a separation agreement). While a severance package can offer financial support during your transition, these are legally binding documents that often require you to waive important legal rights in exchange for the benefits offered.

It is crucial that you do not sign a severance agreement without fully understanding its terms and implications. At Brightwood Law Group, we are able to review your severance agreement and negotiate on your behalf to ensure the terms are fair and your interests are protected. This page explains the importance of careful severance review and the potential for negotiation.

What is a Severance Agreement (Separation Agreement)?

A severance agreement is a contract between an employer and a departing employee that outlines the terms and conditions of their separation from employment.

From the Employer’s Perspective: The primary goal for an employer offering a severance package is often to obtain a “release of claims” from the employee. This means the employee agrees to give up their right to sue the employer for all legal claims, such as wrongful termination, discrimination, harassment, or wage violations.
From the Employee’s Perspective: A severance agreement can provide financial compensation (severance pay), continuation of benefits, and other considerations to help ease the transition to new employment. In exchange, the employee is typically asked to provide the release of claims and agree to other conditions.

It’s important to note that in California employers are not legally required to offer severance pay unless a prior employment contract, company policy, or collective bargaining agreement mandates it. Therefore, if severance is offered, it’s usually in exchange for something from the employee—most commonly, the release of claims.

Why Should You Always Have a Severance Agreement Reviewed by an Attorney?

Before you sign any severance agreement, having it reviewed by an experienced employment attorney is a critical step. Here’s why:

Understanding Your Rights: Many employees are unaware of the full scope of legal rights they might be waving, some of which could be valuable. An attorney can help you understand what potential claims you might have.
Identifying Unfair or Unlawful Terms: Severance agreements are drafted by employers to protect their interests. An attorney can identify clauses that are overly broad, unfair, unclear, or even unlawful in California (like certain non-compete provisions).
Assessing the Adequacy of the Offer: Is the severance pay offered fair and reasonable given your length of service, position, salary, circumstances of your separation, and the strength of any potential legal claims you might have? An attorney can help you evaluate this.
Negotiating for Better Terms: Many terms in a severance agreement are negotiable. An attorney can identify areas for improvement and negotiate on your behalf.
Ensuring Compliance (e.g., OWBPA): For employees aged 40 and over, the Older Workers Benefit Protection Act (OWBPA) sets specific requirements for waivers of age discrimination claims, including a consideration period (typically 21 or 45 days if part of an exit incentive, a 7-day period to revoke, and must advise the employee in writing to consult with an attorney.
Peace of Mind: Knowing that a legal professional has reviewed the document and advised you on its implications allows you to make a fully informed decision.

Common Terms and Provisions in Severance Agreements to Scrutinize

Severance agreements can be complex. Key provisions that require careful review include:

Severance Pay: The amount of severance offered, how it’s calculated (e.g., weeks of pay per year of service), and the payment schedule (lump sum vs. installments).
Release of Claims: This is often the most critical section. It details which legal claims against the employer you are agreeing to waive. It’s essential to understand the scope of this release (e.g., does it cover known and unknown claims?). Note: Certain rights generally cannot be waived, such as the right to file a workers’ compensation claim, the right to unemployment benefits, or the right to report illegal activity to government agencies like the California Department of Civil Rights (CRD) (formerly DFEH) or EEOC (though you might waive the right to recover monetary damages from such agency filings).
Confidentiality and Non-Disclosure Clauses: Your obligations to keep the terms of the agreement and certain company information private.
Non-Disparagement Clauses: Provisions preventing you from making negative statements about the employer, and sometimes requiring the employer to do the same regarding you.
Return of Company Property: Procedures for returning laptops, phones, documents, etc.
Continuation of Health Benefits (COBRA): Details on how your health insurance will be handled after separation, and whether the employer will subsidize COBRA premiums for a period as part of the severance.
Job References: An agreement on what the employer will (or will not) say to prospective future employers when contacted for a reference.
Resignation vs. Termination Language: How your departure is characterized in the agreement (e.g., “voluntary resignation” vs. “termination without cause”) can have implications for unemployment benefits or future job prospects.
Dispute Resolution: Clauses specifying how any future disputes over the agreement will be handled (e.g., mandatory arbitration).

How Can My Severance Agreement Be Improved?

Many employees assume a severance offer is non-negotiable, but this is often not the case, especially if you have potential legal claims or other leverage. We can assess your situation and negotiate for more favorable terms. Areas often open to negotiation include:

Amount of Severance Pay: This is the most common area for negotiation.
Continuation of Health Insurance Benefits: Requesting that the employer pay for COBRA premiums for a longer period.
Characterization of Separation: Negotiating for a “mutual agreement” or “resignation” characterization.
Neutral Job Reference: Securing an agreement for a positive or neutral reference.
Scope of the Release of Claims: Ensuring the release is not overly broad and potentially carving out specific known claims if appropriate.
Terms of Non-Disparagement and Confidentiality: Ensuring these are mutual and reasonable.
Payment for Accrued Vacation Time: While already a legal right in California, ensuring it’s correctly calculated and included.
Vesting of Stock Options or Other Benefits: Negotiating accelerated vesting or extended exercise periods.

The ability to negotiate successfully often depends on the specific circumstances of your departure and any potential legal leverage you may have.

What to Do When Presented with a Severance Agreement

Don’t Sign Immediately: Take your time. You are usually given a specific period to consider the agreement (especially if you are 40 or older). Do not feel pressured to sign on the spot.
Read it Thoroughly: Try to understand all the terms, particularly the release of claims section.
Gather Relevant Documents: Collect your employment contract (if any), recent pay stubs, performance evaluations, the employee handbook, and any documents related to your separation or potential legal claims.
Consult with an Experienced Employment Attorney Promptly: This is the most important step. An attorney can explain the legal implications, identify potential issues, and advise you on whether the offer is fair and whether negotiation is advisable. Do this before and with enough time prior to the expiration period.

How Can Brightwood Law Group Assist with My Severance?

Brightwood Law Group, PC is dedicated to ensuring that departing employees are treated fairly and that their rights are protected during the separation process. We provide expert legal assistance by:

Thoroughly Reviewing Your Severance Agreement: We meticulously examine every clause, explaining the terms in plain language and highlighting any potentially problematic or unfavorable provisions.
Identifying Your Legal Leverage: We assess any potential legal claims you might have against your employer (such as wrongful termination, discrimination, retaliation, or unpaid wages), as these can provide significant leverage in negotiations.
Advising on the Fairness of the Offer: We help you understand whether the proposed severance package is reasonable in light of your circumstances, tenure, position, and any potential claims being waived.
Developing a Negotiation Strategy: Based on our assessment, we work with you to develop a clear strategy for negotiating improved terms.
Directly Negotiating with Your Employer: We can negotiate with your former employer or their legal counsel on your behalf, advocating for a more favorable severance package that better protects your interests.
Ensuring Clarity and Protection: We work to ensure the final agreement accurately reflects all negotiated terms and provides you with the maximum possible protection.

Severance agreements often arise in the context of your employment terms. Learn more on our Employment Contracts Page.

Understanding your rights is key if you believe your departure involves Wrongful Termination, Discrimination, or Retaliation.

Offered a Severance Agreement? Ensure Your Rights Are Protected Before You Sign. Call Us Now!

A severance agreement is a critical legal document that can impact your future. Don’t navigate this process alone. Contact Brightwood Law Group, today for a confidential consultation to have your severance agreement reviewed by an experienced California employment attorney. We are here to help you make informed decisions and negotiate the best possible terms for your departure.