Deciding Whether to Sign a Severance Agreement
Clients often need to decide whether signing a severance agreement is "worth it." T.Burd Law Group attorneys can review your severance agreement for a flat fee. The consultation involves reviewing the agreement and explaining to you its important provisions. Additionally, we discuss problems that existed at your employment and whether those problems are sufficient reasons not to sign the agreement. Sometimes, those problems may not be strong enough for a law suit, but can be used to negotiate a higher severance. We also offer tips on How to Negotiate an Employment Severance Agreement.
What is a Severance Agreement
A severance agreement is a new contract between an employee and soon-to-be-past employer. Typically, the employer offers to pay the employee money in exchange for a waiver of any and all future claims against the employer. In some cases, severance agreements are given to an employee in appreciation for past performance. More often, however, it is merely a means to induce the employee into waiving his or her rights.
The language of the severance agreement can range from simple to verbose, but the message is always the same: "you waive the right to bring any and all claims against your employer." In California, Civil Code section 1542 provides that a general release does not extend to claims that are not known about. However, this protection is also waived in severance agreements. This means that you cannot bring ANY claims against your employer in the future regardless of whether you know about the claims at the time of signing.
If you do not have a viable legal claim, this waiver is not a problem. However, if you believe you were wronged by your employer, it is important to understand that this waiver is binding. For that reason, it is worth having an attorney review an agreement before you give up potential claims.
Also important to note, is that the waiver of rights is a two-way street. A properly written severance agreement should also force the employer to waive any future claims against the employee. This can protect the employee when an employer feels wronged.
Here is what is not waived: unemployment insurance. Signing a severance agreement that states the employee has received any and all wages, does not waive the employee's right to request unemployment insurance. Similarly, if the employer decides to contest the unemployment insurance claim, the severance agreement does not prohibit the employee from appealing the denial. A severance agreement cannot waive an individual's statutory right to unemployment insurance, no matter what the contract says.
Turning down money-in-the-hand is difficult, but the decision to waive one's legal rights should never be made lightly. However, once you are informed about what is waived by signing the severance agreement, you can– and should – do so confidently.