Understanding Your Rights to Severance Pay

If you take a job, one of the benefits of that job may be getting severance pay if you are terminated.

Severance pay is provided to an employee when their employment ends. It usually is only payable when an employee is not fired for cause—that is, when there are layoffs, or company restructuring, or something else that the worker didn’t cause.

Severance is generally a payment above and beyond the normal wages that you previously earned from working.  And, in exchange of receiving severance pay, your employer may ask you to sign a Settlement and Release Agreement agreeing not to sue them for any issues you may have with your employment.   This may be a tip off that you do have claims you did not think you had and an indication that you might want to speak to an attorney before signing anything upon your termination.  Employers are normally very open to giving extra time to allow you to consider any documents they want you to sign.

Not Legally Required

There is no legal requirement that any employer provide severance pay. But if it is agreed to, it must be paid to a worker in a timely fashion. Although there is no hard and fast time frame for this, often 60 days is a good barometer for the timeline to receive severance payment.

Waivers of Claims

If severance is offered, an employer may condition payment of severance on a worker’s waiver of claims, commonly referred to as a Settlement and Release Agreement.

That is, your employer may force you to sign a release, or promise you won’t sue, in return for receiving the severance. Employers often do this as a tactic to get employees to waive claims when they believe the worker may have a Fair Labor Standards Act case or a case for discrimination.

That means that you may have to choose between accepting the severance package or pursuing your lawsuit. You should consult an employment attorney to determine which option may be best for you.  A good attorney will often be able to identify points they can use as leverage to obtain an enhanced severance package for you.

Employers can’t condition your receipt of severance on you agreeing not to compete with the company, as noncompete agreements are not legal in California, nor anywhere else in the United States as of 2024.

Contractual Rights to Severance Pay

Usually, severance pay benefits will be set forth in a contract, or an employee manual, or other document spelling out the benefits of employment. Even if these don’t exist, a company’s past history of providing severance to workers may create a situation where the employer must pay severance.

For example, if a company paid severance to the past 3 male employees that ended employment with the company, but not to a female employee whose employment ended, the company may not only have to pay severance to that female employee but may also be liable for gender discrimination.

Because severance will often be listed in a document, that document will usually contain the terms of eligibility for severance. For example, it may say that an employee must work for the company for a specified amount of time, or put in a specific number of work hours, to qualify for severance. It may say that an employee cannot be terminated for cause, in order to receive severance.

Employees who feel that the company isn’t following its own contractual guidelines and provisions, have a right to sue, to enforce the terms of the severance agreement.  Again, having an attorney review the circumstances regarding your termination may well be worth the time and money for a one hour consultation.

Are you owed back wages, or severance pay that is not being paid to you? Contact the San Jose employment attorneys at the Costanzo Law Firm today.

Source:

dir.ca.gov/dlse/finalpay.pdf